FIRPTA, the Foreign Investment in Real Property Tax Act, was enacted in 1980 and provides that if the Seller of real property is a foreign person, the Buyer must withhold a tax equal to between 10% and 15% of the gross purchase price, unless an exemption applies. A foreign person is a nonresident alien individual. A resident alien is not considered a foreign person under FIRPTA.
Most Common Exemption:
Sales Price is not more than $300K. The buyer
or a family member must have plans to reside at the property for at
least 50% of the number of days the property is used by any person
during each of the first two twelve month periods after sale.
Other Exemptions that may apply are:
Another common exemption is for the Seller to provide a certificate
stating that they are not a foreign seller as a result of being a U.S. citizen or resident alien.
The seller may also apply for and receive a withholding certificate
prior to close of escrow from IRS excusing withholding or reducing