FIRPTA Withholding and its various aspects

When it comes to property transaction on U.S. soil between an individual and a foreign person, the government keep a close eye on it. FIRPTA is one such asset used by the government to keep in check the transfer of property and prevent any fraud. Whether you are a professional foreign real estate investor or have recently purchased a property from a foreign person or corporation, it’s important that you have a good idea about the foreign investment in real property tax act, a.k.a; FIRPTA.  

Enacted in the year 1980, FIRPTA requires a buyer of U.S. real property to withhold up to 15% of the gross proceeds that the seller receives from the sale if the property is bought from a foreign national seller. Internal revenue service ensures that the whole process is kept in check. However, if an individual has a FIRPTA withholding certificate, it may decrease withholding based on the gain of a sale instead of the selling price. A FIRPTA withholding certificate allows an individual to adjust the amount that needs to be withheld from the disposition of a U.S. real property.

Having a FIRPTA withholding certificate can work as a great asset for an individual involved in the real property transaction on U.S. soil. Though a complex process, FIRPTA withholding certificate services like FIRPTA tax returns can help smoothen the whole process. 

FIRPTA withholding exemptions for international real-estate transactions

When it comes to FIRPTA withholding requirements, there are several exemptions provided by FIRPTA. 

Home Value

If you purchase a home from a foreign corporation or individual and the cost of the property is less than $3000000, foreign investment in real property tax act will not be applied to that property. However, it must abide by set qualifications.

Non-Foreign seller

If an individual with whom you are buying a property can provide viable documents that they are indeed a U.S. citizen, the FIRPTA tax will not be applied.  

Qualified Substitute

If the person you are buying from can give a qualified substitute certification that they are not a foreign person. You might be safe from FIRPTA withholding tax. However, it is always a good idea to consult an experienced tax accountant to avoid any fraud and to reduce FIRPTA withholding. 

Withholding Certification

You can also apply for FIRPTA withholding certification to the IRS to avoid FIRPTA withholding taxes. Get in touch with us at FIRPTA tax returns. We can help.

Non- recognition Provision

Certain gains or losses are not recognized under the IRS code. Get in touch with FIRPTA tax return and know if you can save FIRPTA withholding taxes. 

FIRPTA tax solutions can help

If you have any queries or need any help with the FIRPTA withholding certification, we can help. Get in touch with professionals at FIRPTA tax returns for a smoother experience.