Foreign Investment in Real Property Tax Act (FIRPTA)

If a seller is a foreign individual or corporation, buyers are required to withhold, report, and transmit to the IRS 10 percent of the total purchase price of real property. This is done under The Foreign Investment in Real Property Tax Act (FIRPTA). This act was enacted to ensure that foreign owners of real property paid tax due on sale of real property and didn't effectively "skip town".

Exemptions from withholding exist when:

  • The seller furnishes the buyer with an affidavit of nonforeign status
  • The real property is acquired for use by the buyer as the buyer´s residence and sells for no more than $300,000
  • The transaction is a "non-recognition transaction" for the seller and the seller furnishes the buyer with a notice to that effect.

Buyers who fail to withhold may be personably liable for the tax burden. It is highly recommended that all tax withholding questions be directed to a tax professional. Real estate agents are generally not qualified to provide advice on tax withholding.