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FIRPTA Withholding

The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding.

FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. Tax law requires that a non-resident alien who sells an interest in real property is subject to withholding, for tax purposes, of 15% of the gross sales price.

If 15% of the selling price is more than the tax you will owe on this sale, then a withholding certificate may be ideal for you.

Generally the buyer does not have to withhold if they acquire the property for use as a residence and the amount realized (sales price) is not more than $300,000.

The buyer or a member of their family must have definite 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 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant. For this exception, the buyer must be an individual purchasing in their own name.