Foreign Investment in Real Property Tax Act, or FIRPTA, is a United States tax law that imposes income tax on foreign persons selling U.S. real estate. Whether an international or U.S. person, income tax must be paid on the disposition of U.S. real property. Under this act, if someone purchases U.S. real estate from a foreign person, you may be required to withhold and pay to the IRS a percentage of the sales amount.
The Internal Revenue Service details terms and procedures here and information about FIRPTA withholding here. To watch a video about the tax law act, click here.
Q. Does FIRPTA apply to personal residences?
A. FIRPTA applies in nearly all residential and commercial transactions, in which a foreign owner of a U.S. real property interest sells a property. The amount withheld is not the tax but is payment on the taxes that will be due from the seller.
Q. How does FIRPTA define a “United States person”?
A. A U.S. citizen or a green card holding resident alien
Q. How does FIRPTA define a “foreign person”?
A. Any person other than a United States person.