FIRPTA - How It May Apply to Real Estate Transactions

FIRPTA - Foreign Investment in Real Property Tax Act

• When a foreign owner gets ready to sell, they could be subject to a 10% or 15% withholding (of the sales price)
• unless the transaction is exempt from FIRPTA.
  • Most 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.
• Other exemptions that may apply are:
  • Seller to provide a certificate showing they are not a foreign seller which The BIG W Law firm will prepare as part of our closing services.
  • Seller 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.