FIRPTA Tax Planning
Accounting services
FIRPTA Tax Planning for Foreign Investors
FIRPTA, the Foreign Investment in Real Property Tax Act, is part of the United States' effort to tax income and gain connected to U.S. real estate. We help foreign investors plan for it before they buy, while they own, and when they sell.
Who FIRPTA Affects
When a foreign person sells a U.S. real property interest, FIRPTA generally requires the buyer to withhold part of the amount realized and pay it to the IRS. The standard rate is 15%, with reduced or zero rates in certain situations. In other words, the seller may not receive the full purchase price at closing, and the buyer and settlement agent can be liable if withholding isn't handled correctly.
This applies to sales and exchanges, and it can also reach liquidations, redemptions, gifts, and other transfers of U.S. real property interests.
How We Help Foreign Investors
- Structuring the investment: legal, economic, and tax considerations shaped by the investor's home country, investor type, property type, holding period, and exit plan.
- Reporting for foreign owners: U.S. returns and withholding on rental and business income while you own the property.
- FIRPTA planning: using partnerships, corporations, LLCs, and REITs, domestic and foreign, to manage FIRPTA exposure lawfully while weighing the other tax consequences of each structure.
- The U.S. return after a sale: filing the nonresident return that reports the sale and claims credit for the amount withheld.
FIRPTA Solutions, Inc.
For the transaction paperwork itself, including ITIN applications, withholding certificates, and remittance forms, work with FIRPTA Solutions, a subsidiary of St. Clair Advisory Group, LP, with Certified IRS Acceptance Agents on staff.
Related Reading
- What Is FIRPTA in Real Estate?
- Selling Florida Property as a Foreign Owner: Tax Checklist
- Tax Treaties for Foreign Investors in U.S. Real Estate
Frequently Asked Questions
What is the FIRPTA withholding rate?
The general rate is 15% of the amount realized on the sale. Reduced rates, or no withholding, can apply in specific situations, such as certain sales of homes the buyer will live in. Confirm the rate for your transaction before closing.
Is FIRPTA withholding the final tax?
No. Withholding is a prepayment. The seller files a U.S. return reporting the actual gain, and any amount withheld beyond the tax owed can be refunded.
How is St. Clair different from FIRPTA Solutions?
St. Clair handles tax planning, structuring, and returns for foreign investors. FIRPTA Solutions, our subsidiary, focuses on the transaction paperwork, like withholding certificates and ITIN applications.
