Foreign Investment in Real Property Tax Act (FIRPTA)
My name is Cindy, and I work for the Internal Revenue Service.
Here's some information about purchasing real estate in the United States from a foreign owner.
People from all over the world invest in United States real estate.
If you're buying property from a foreign owner, here are some things you need to know.
The Foreign Investment in Real Property Tax Act of 1980, also known as FIRPTA, may apply to your purchase.
FIRPTA is a tax law that imposes U.S. income tax on foreign persons selling U.S. real estate.
Under FIRPTA, if you buy U.S. real estate from a foreign person, you may be required to withhold 10% of the amount realized from the sale.
The amount realized is normally the purchase price.
The withholding is how we collect U.S. tax owed by foreign sellers.
Here's how FIRPTA works.
If the law applies to your purchase, then within 20 days of the sale, you are required to file Form 8288 with the IRS.
Along with the form, you submit 10% withholding.
It is important to know about FIRPTA, because if you do not withhold the required amount, file the form on time, and submit the withholding, penalties do apply.
There are some exceptions.
For example, FIRPTA law does not apply if you are buying a residence for $300,000 or less or the property is not a U.S. real property interest.
To learn more about FIRPTA, including whether the law applies to your purchase, visit www.irs.gov and type FIRPTA into the search field.
You can also get a copy of Form 8288 on IRS site at the Forms and Publication page.
The forms come with instructions.