SELLER ALERT! TAX LAW ON FOREIGN INVESTMENT IN REA

As a seller in the real estate market, it's important to stay informed on changes in tax law that may affect your transactions. One such law is the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), which affects foreign buyers investing in U.S. real estate.

Under FIRPTA, when a foreign person sells U.S. real estate, the buyer is required to withhold a portion of the purchase price and remit it to the IRS. This withholding requirement is designed to ensure that foreign sellers pay their U.S. tax obligations on any gains from the sale of U.S. real property.

For buyers, it's important to understand the implications of FIRPTA when considering a purchase from a foreign seller. If the buyer fails to comply with the FIRPTA withholding requirement, they may be held liable for any unpaid tax obligations. It's important for buyers to work closely with their real estate agent and attorney to ensure compliance with FIRPTA.

For sellers, FIRPTA may have an impact on the sale of their property. The withholding requirement may reduce the amount of cash the seller receives at closing, and failure to comply with FIRPTA may result in penalties and interest. It's important for sellers to work with their real estate agent and attorney to understand the potential impact of FIRPTA on their transaction.

In recent real estate news, the Protecting Americans from Tax Hikes (PATH) Act of 2015 made some significant changes to FIRPTA. These changes included increasing the withholding rate from 10% to 15% for properties sold for $1 million or more, and increasing the exemption amount for certain foreign pension funds.

Overall, FIRPTA is an important law for both buyers and sellers to understand in the real estate market. With the guidance of experienced professionals, buyers and sellers can navigate the potential impact of FIRPTA on their transactions.