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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