FIRPTA RULES FOR FOREIGN SELLERS

Non-US citizens who will be selling their Sarasota real estate need to know about FIRPTA, the Foreign Investment Real Property Tax Act.

WHAT IS FIRPTA?

FIRPTA is a withholding, not a tax.  The amount withheld is applied to the seller's total US tax liability for the calendar year in which the property is sold.

 

The buyer of your Sarasota property is responsible for making sure the FIRPTA withholding is collected and sent to the IRS. The buyer incurs liability to the IRS if this withholding is not collected and the property seller has outstanding taxes due.

 

Effective 2/16/2016, the FIRPTA withholding tax law will change.

 

  • A mandatory withholding of 15% will apply to property sales over $1,000,000;

  • If the sales price is $300,000 or less on a property used as a residence, withholding is not required;

  • If the sales price is $300,000 to $1,000,000 and the property is used as a residence, the withholding amount is 10%.

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IS FIRPTA MANDATORY FOR A FOREIGN SELLER?

The short answer is yes.  You should be prepared to have the FIRPTA withholding deducted from your proceeds at closing.  A foreign seller may avoid the FIRPTA withholding if they have a Taxpayer Identification Number (TIN), or if they can show they have a Green Card as a resident alien, or by meeting the "Substantial Presence" test in accordance with IRS regulations.  Documented 1031 exchanges also may negate a FIRPTA withholding.

 

The foreign seller may also avoid FIRPTA charges at closing by providing an IRS Withholding Certification proving that their total tax liability is less than the 10% FIRPTA withholding.

 

It is important to understand that since the buyer of the property will incur tax liability if FIRPTA is not collected and the seller does not fulfill their tax obligations, the buyer may elect not to waive collecting FIRPTA at closing.

CONSULT A PROFESSIONAL

As your Sarasota Realtor, it's my job to be aware of how FIRPTA may affect you as a foreign seller when listing your property for sale.  

 

FIRPTA is tax law and is beyond my area of expertise as a Realtor.  You should consult a qualified title agent, accountant, or real estate attorney, to determine if you will be required to pay the FIRPTA withholding at closing.

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Click here to read more about FIRPTA withholding rules and exceptions.

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David Barr, Sarasota FL Realtor

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