What the heck is a FIRPTA??!!

What is FIRPTA??

Hello everyone, on this weeks Real Estate Insight with Ram we are talking about the Foreign Investment in Real Property Tax Act, better known as FIRPTA.

**Please note, I am not a tax professional so please follow up with your CPA or attorney if you have any questions. This is for informational purposes only**

So who is subject to FIRPTA? And what happens if I or the seller of a house I am being fall into this category?

To keep things simple, anyone that can be identified as a “foreign person” that is purchasing or selling a home in the U.S could be subject to the FIRPTA Witholding.

A “foreign person” is described in the IRS website as not being a U.S Citizen, does not have a green card and does not meet the standard presence test (This should be determined by a Tax Professional familiar with FIRPTA) . You can have a social security number and a drivers license and still be subject to the FIRPTA withholding.

If the seller of the home is unable to provide the following forms of identification: US Birth Certificate, U.S Passport, Naturalization Papers, or Permanent Resident Visa aka Green Card, the BUYER is responsible for ensuring the appropriate amount of withholding is applied at closing and delivered to the IRS within 20 days of closing or they will be responsible for the withholding of up to 15% plus interest and penalties!

Because our amazing city is one of the most diverse cities in America and we have many foreign buyers and sellers involved  in real estate transactions every day. We as realtors are here to look out for you and give you recommendations on what you can do to put you in the best position possible in your transaction.

As a foreign seller, you have some ability to potentially reduce or even get a full exemption on the withholding. This can and should be taken care of at the beginning or even before you go under contract with a buyer by applying for a withholding certificate.

As a buyer of a property subject to FIRPTA withholding, you must make sure to withhold if it applies and also make sure to deliver the funds to IRS in the appropriate time or you will be responsible. An affidavit of non-foreign status may not always protect you, so be sure to speak to your CPA, or attorney to be sure.

As always, if you have any questions at all about this or any other part of the real estate process please do not hesitate to give me a call or shoot me a message. I love my job and truly enjoy guiding my clients to a successful closing. Thank you