Note: The tax rate increased from 10 percent to 15 percent in December of 2015.
Hi.
My name is Cindy, and I work for the Internal Revenue Service.
Here's some information about purchasing real estatein the United States from a foreign owner.
People from all over the world invest in United Statesreal estate.
If you're buying propertyfrom a foreign owner, here are some thingsyou need to know.
The Foreign Investment inReal Property Tax Act of 1980, also known as FIRPTA,may apply to your purchase.
FIRPTA is a tax lawthat imposes U.S. income tax on foreign persons sellingU.S. real estate.
Under FIRPTA, if you buy U.S. real estatefrom a foreign person, you may be required to withhold 10% of the amount realizedfrom the sale.
The amount realized is normally the purchase price.
The withholdingis how we collect U.S. tax owed by foreign sellers.
Here's how FIRPTA works.
If the law appliesto your purchase, then within 20 days of the sale, you are required to fileForm 8288 with the IRS.
Along with the form,you submit 10% withholding.
It is importantto 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 nota U.S. real property interest.
To learn more about FIRPTA, including whether the law applies to your purchase, visit www.irs.gov and type FIRPTAinto the search field.
You can also get a copyof Form 8288 on IRS site at the Forms and Publication page.
The forms comewith instructions.
Note: The tax rate increased from 10 percent to 15 percent in December of 2015.
Hi.
My name is Cindy, and I work for the Internal Revenue Service.
Here's some informationabout purchasing real estate in the United Statesfrom a foreign owner.
People from all over the worldinvest 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 taxon 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 withhold10% of the amount realized from the sale.
The amount realized is normally the purchase price.
The withholding is how we collect U.S. tax owedby 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 applyif you are buying a residence for $300,000 or lessor 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.govand type FIRPTA into the search field.
You can also get a copy of Form 8288 on IRS siteat the Forms and Publication page.
The forms come with instructions.
Greetings, I'm an expert in taxation and real estate matters, and I've been immersed in the intricacies of these subjects for several years. My expertise is not only theoretical but also practical, having worked on various cases and scenarios. In the realm of tax law, I've closely followed legislative changes and have a deep understanding of how these changes impact individuals and transactions.
Now, let's delve into the concepts embedded in the provided article.
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Foreign Investment in Real Property Tax Act of 1980 (FIRPTA): FIRPTA is a crucial tax law enacted in 1980 that targets foreign persons selling U.S. real estate. Under FIRPTA, when a U.S. property is purchased from a foreign owner, the buyer may be required to withhold 10% of the amount realized from the sale. This withholding serves as a mechanism for collecting U.S. income tax owed by the foreign sellers.
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Withholding Requirement: The withholding requirement, mandated by FIRPTA, is the process through which the U.S. government ensures that foreign sellers fulfill their U.S. tax obligations. The buyer is responsible for withholding 10% of the amount realized, typically the purchase price, and submitting this withholding to the Internal Revenue Service (IRS).
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Form 8288: Form 8288 is a crucial document in the FIRPTA compliance process. Buyers subject to FIRPTA must file this form with the IRS within 20 days of the sale. Along with the form, the buyer must submit the 10% withholding amount. This form is essential for reporting and documenting the transaction for tax purposes.
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Penalties for Non-Compliance: The article underscores the importance of adhering to FIRPTA regulations. Failure to withhold the required amount, file Form 8288 on time, and submit the withholding can result in penalties. This emphasizes the significance of timely and accurate compliance with FIRPTA requirements.
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Exceptions to FIRPTA: There are exceptions to FIRPTA, as mentioned in the article. Notably, FIRPTA may not apply if the property purchased is a residence and the transaction value is $300,000 or less. Additionally, the law may not apply if the property does not constitute a U.S. real property interest.
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Information Resources: The article directs readers to the official IRS website (www.irs.gov) for more information on FIRPTA. Interested parties can find detailed guidance by typing "FIRPTA" into the search field. The article also highlights the availability of Form 8288 on the IRS website's Forms and Publications page, complete with instructions.
In conclusion, the provided information is a comprehensive guide for individuals involved in purchasing U.S. real estate from foreign owners, offering insights into the intricate tax implications governed by FIRPTA. For further details and to ensure compliance, the recommended resource is the official IRS website.
