You should be aware of the FIRPTA regulations for foreign investors.
As a U.S.-based Realtor, it is essential to understand the Foreign Investment in Real Property Tax Act (FIRPTA). This law pertains to foreign investors buying real estate property in the U.S. and why it’s crucial for Realtors who primarily work with buyers, as well as sellers, to be aware of it.
“It’s crucial to be aware of the FIRPTA regulations.”
When a foreign resident purchases property in the U.S., it’s advisable to consult an attorney or an accountant to comprehend how the U.S. tax laws work and determine whether they need to pay taxes in the U.S. If they are not paying taxes, they can still buy property, but they must understand the ramifications when selling it.
The federal FIRPTA rules require the buyer to remit 15% of the gross sale amount to the Internal Revenue Service at closing. The buyer is responsible for ensuring that the check, which is issued by the title company at closing, is mailed to the IRS. Although it may sound daunting, the title company can assist in taking that 15% of the proceeds, and it is crucial for both buyers and sellers to understand this law.
It’s worth noting that the 15% is not calculated on the profits but the sale price, and it’s the buyer who is liable to ensure the money reaches the IRS. Realtors working with foreign investors must ensure that they are aware of these regulations, and it’s recommended that foreign investors work with a company or an attorney to determine how to reduce their tax burden. This could include filing monthly or yearly tax records and paying taxes based on their income.
Additionally, if the property is a rental income property, it’s crucial to be aware of the FIRPTA regulations. For more information or assistance, reach out to us by phone or email. We’re happy to help you.
