FIRPTA stands for Foreign Investment in Real Property Tax Act and it is the Federal law governing the taxation & withholding by foreign persons selling US real estate.
Under FIRPTA, the buyer is required to withhold either 10% or 15% of the gross sales price from proceeds as a “deposit” due to IRS within 20 days after closing; when purchasing from a foreign seller (certain exceptions apply).
New for February 16, 2016 - If the total sale is more than $1,000,000 OR the property is not being acquired as a residence, the buyer is required to withhold 15% of the gross sales price.
A “foreign person” is defined under FIRPTA as a:
Affidavit can be executed by an “eligible” buyer.
Withholding Certificate may allow lesser amount withheld at closing.
No withholding required under FIRPTA if: