THE FOREIGN INVESTMENT IN REAL PROPERTY ACT (FIRPTA)
15% WITHHOLDING SINCE FEBRUARY 16, 2016
FIRPTA, which stands for the Foreign Investment in Real Property Act was enacted in 1980 to ensure that foreigners, who are not required to pay income taxes or file income tax returns in the United States, paid their income taxes upon selling real property in the U.S.
Big changes occurred in 2016 under the FIRPTA law. Effective February 16, 2016, the withholding increased from 10% to 15%. That is a huge difference especially for property sales occurring in the early party of the year. Sellers in 2016 will need to wait until 2017 to file their taxes and presumably obtain their FIRPTA refunds.
Although you can apply for early discounts, they are rarely approved. Once FIRPTA has been withheld, then it will likely stay withheld until such time as the foreign seller files their income taxes.
There are some exemptions to FIRPTA withholding including:
- The amount realized does not exceed $300,000.00 and the buyer will the an owner occupant. This requires a specific affidavit regarding owner occupancy.
- Seller applies for a withholding certificate with the IRS using form 8288-B. This can take longer than 90 days however and therefore it is necessary to plan ahead so it does not stall your closing.
There is also a distinction as of February 16, 2016:
- If the property sells for $300,001 to $1 million, and it will be owner occupied, then the FIRPTA rate is 10%.
- If not owner occupied, then 15%
- For properties selling over $1 million, the FIRPTA rate is 15% whether or not the buyer will occupy the property
Attorney Jacqueline A. Salcines, Esq. is both a real estate lawyer and accountant with extensive experience representing buyers and sellers in their real estate property needs in Florida. As an attorney, accountant and title agent for Old Republic National Title Insurance, Inc., we provide a complete array of closing services. Consult with attorney Jacqueline Salcines, PA today with regard to:
- Review of Contract for Sale and Purchase
- Review of Contract Addendums
- Review of Condominium Riders
- Title search and examination
- Lien letters
- Incorporation for purchase
- Quit Claim Deeds
- Tax implications on purchase
- Survey requests
- Estoppel requests
- Lien negotiation
- IRS/Federal tax lien on property negotiations
- Seller docs
- Preparation of Purchase Money Mortgages and Notes
Meet with our real estate attorney today and put us to work for you. The first consultation is always free of charge. Or email attorney Jacqueline Salcines directly your real estate question at J.Salcines@salcineslaw.com
TRUST | COMMITMENT | RESULTS
Jacqueline A. Salcines