Monday, 24 February 2014

Selling US Real Estate? Plan for 10% FIRPTA Withholding Tax.

If you are a resident of Canada or a non-resident of US and own a property in the US which you are in the process of selling you must be aware of the FIRPTA (Foreign Investment in Real Property Tax Act) tax.  The tax is equal to 10% of the proceeds of sale and will be deducted by the purchaser / title company and remitted to IRS, even though your actual taxes may be less.  You will be able to claim a credit when you file your US tax return.  There are certain exemption and the main one applies to properties under $300,000 which will be used personally by the purchaser or his family members.

Click for exceptions to FIRPTA

If you advise the purchaser on the closing date or before, that you have applied for a Withholding Certificate from the IRS  the purchaser or his agent will not remit the 10% FIRPTA and wait for the certificate and remit the amount approved by IRS.

Click for information on Withholding Certificate

The seller is required to file an application on form 8288-B together with backup information.  IRS will normally respond in 90 days.

Click for how to apply for a Withholding Certificate

 For more information on interesting tax matters visit our website

This blog is for general information only and cannot replace professional advice.
The reader is invited to contact the writer to discuss the contents of the newsletter.
Readers are advised to seek professional advice before acting on the material

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1 comment:

  1. Good realtors have lots of listings, if you are a renter you should check them regularly. Our property manager had a great first impression on us with his listings.