How Much Is The FIRPTA Withholding?

How much is the FIRPTA withholding requirement? We’re going to find out today.

Hello everyone. Welcome back to our channel. I am Robert Acevedo, an IRS enrolled agent and today we’re going to talk about the important topic of IRS Withholding better known as FIRPTA withholding on foreign investors

What is FIRPTA? FIRPTA stands for Foreign Investor Real Property Tax Act. It is a US tax law that requires foreign sellers to pay tax on capital gains.

How much tax though is actually required? When a foreign investor sells US real estate the IRS requires that the buyer do an upfront withholding from the proceeds of the sale in order to pay tax. Now, as we mentioned, how much exactly is the FIRPTA withholding? Well as with anything it depends. Generally, the withholding is 15% of the gross sales price. But there are some variables that could apply to your sale. Let’s say that you’re buying a property for $300,000. 15% withholding would be $45,000. That amount would be withheld at the closing and sent to the IRS by the buyer or the title company. What you have to remember is that this amount of withholding is an upfront withholding requirement. It is not necessarily the final tax liability of the seller. But, the good news is there are some exceptions that could apply to your sale. If for example the sales price is under $300,000 and the buyer intends to live in the house for at least two years, no withholding is required.

So, in that scenario the percentage of the withholding would actually be zero. Another example would be if the sales price is over $300,000 But under a million and the buyer intends to also live in the house for at least two years, FIRPTA percentage still applies but instead of 15% it would be 10%

To see which exception you can possibly qualify for, it is always a good idea to consult with a tax professional like myself to guide you with these options. If you are a foreign seller and have an upcoming real estate transaction and are not sure if FIRPTA applies to you, make sure that you are well informed and consult with experts like ourselves to see how FIRPTA would apply in your case. Being informed about the FIRPTA rules is going to go a long way to help you meet all IRS requirements and possibly get a refund.

If you found the video helpful, don’t forget to hit the like button, subscribe and hit the ring bell for more tips on FIRPTA transactions. If you have any questions about FIRPTA, please make sure to leave them in the comments. We would love to hear from you.

Subscribe to my channel

Sorry, there was a YouTube error.