FIRPTA stands for Foreign Investment in Real Property Tax Act. This is the Federal law governing the taxation and withholding of foreign persons selling US real state. This withholding obligation is generally imposed on the buyer when the US real property is a acquired from a foreign person.
FIRPTA changes under the PATH Act
- Unless an exemption or reduced rate applies, the withholding amount was increased from 10% to 15%.
- For properties being acquired by the transferee not for use as a residence 15% must be withheld.
- For properties being acquired by the transferee for use as a residence the following rates apply:
- If the sales price is $300,000 or less withholding is not required
- If the sales price is greater than $300,000 but not more than $1 million, 10% must be withheld
- If the sales price is greater than $1 million, 15% must be withhold
So What Does the Condition That the Buyer Acquire the Property For Use As a Residence Mean?
The buyer is acquiring the property for use as a residence if on the date of the transfer the buyer(s) (or the buyer’s family) has definite plans to reside at the property for at least 50 percent of the number of days that the property is used by any person during each of the first two 12-month periods following the date of the transfer. The number of days that the property will be vacant is not taken into account in determining the number of days such property is used by any person.