Buying A Home as a Foreign Buyer And How FIRPTA Applies
FIRPTA- Foreign Investment in Real Property Tax Act
TTWhen a foreign owner gets ready to sell, they could be subject to a 10 % withholding( of the Sales Price) unless the transaction is exempt from FIRPTA. uTMost common exemption: Sales Price is not more than $ 300K. The buyer or a member of their family must have plans to reside at the property for at least 50 % of the number of days the property is used by any person during each of the first two twelve month periods after sale.
TTOther Exemptions that may apply are: uTSeller to provide a certificate showing they are not a foreign seller uTSeller receives a withholding certificate from IRS excusing withholding or reducing withholding
If applicable see forms:
W-7( application for IRS Individual Taxpayer Identification Number) 8288-B( Application for Withholding Certificate for Dispositions by Foreign Persons of U. S. Real Property Interests)
Go to www. irs. gov and click on Forms and Publications to get copies of these and other forms.
Is Seller a US Citizen or a US Resident?
Is Seller recognizing a gain of less than the 10 % yes
NO
- See your CPA or tax attorney regarding application form 8288B for an IRS Withholding Certificate.
NO
Buyer should request for 10 % withholding yes
Complete Certification of non-foreign status
Does the Buyer have definite plans to use the property as his residence and sale price does not exceed $ 300,000?**
- Carefully review First American Title’ s agreement concerning FIRPTA withholding. All parties, including seller’ s tax professional, must agree and execute this agreement.
- Escrow provides an estimated seller statement. yes
Complete buyer’ s declaration for $ 300,000 residence exemption form
* NOte: Escrow will withhold and remit to the IRS 10 % pending receipt of Withholding Certificate, unless the parties agree otherwise.
*** IRC RequIRes: The BuyER acquires the property for use as a home and the amount realized( sales price) is not more than $ 300,000. The BuyER or a member of their family must have definite plans to reside at the property for at least 50 % of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant
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