FIRPTA

Foreign Investors Real Property Taxation Act requires a percentage of the sales price be withheld for foreign ownership. This applies to nonresident aliens of USA, including foreign partnerships, foreign trusts and foreign estates. It is the Buyer’s responsibility to report and withhold, not the escrow officer. Seller can request a waiver or reduced withholding and there are some exceptions under the IRS Code (IRC 1034). The withholding amounts are as follows:

If sales price is $300,000 or less AND the property will be used by the buyer as a primary residence, the withholding rate is 0%.

If the amount realized exceeds $300,000 but does not exceed $ 1 million, AND the property will be used by the buyer as a primary residence, the withholding rate is 10% on the full amount realized.

If the amount realized exceeds $1 million, then the withholding rate is 15% on the entire amount, regardless of use by the buyer.