Foreign Investments in RE
April 19, 2025
Offering Memo vs IC Memo
April 25, 2025We are not loan specialists, financial advisors, CPA, or tax attorneys. The information provided on this blog is for general informational purposes only and should not be construed as financial, legal, or tax advice. Before making any investment or financial decisions, please consult with a qualified CPA, financial advisor, or tax attorney for guidance tailored to your individual situation. For accurate and comprehensive details regarding loans, taxes, or financial matters, always seek advice from a licensed professional or contact the appropriate government agency for official guidance.
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ITS AN TAX WITHHOLDING LAW
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ITS NOT AN IMMIGRATION LAW
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BUYER IS RESPONSIBLE TO WITHHOLD
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WHY? CAUSE IRS MAY NOT BE ABLE TO CONTROL ACTION OF SOMEONE NOT IN THE COUNTRY)
FIRPTA is a U.S. tax withholding law—not an immigration law—enacted to ensure foreign sellers pay taxes on gains from selling U.S. real estate. Before FIRPTA, the IRS struggled to collect taxes from sellers who were not in the country. To solve this, the law makes the buyer responsible for withholding and remitting a percentage of the sale price to the IRS, acting as a safeguard for tax collection
| Category | Withholding Rate | Conditions |
|---|---|---|
| General Withholding Rate | 15% | Applies to most transactions involving foreign sellers. |
| Reduced Withholding for Primary Residences | 10% | Sale price between $300,000 and $1 million, and buyer intends to use as a primary residence. |
| No Withholding for Lower-Priced Residences | 0% | Sale price under $300,000, and buyer intends to use as a primary residence. |
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Buyer Responsibility: The buyer must withhold and remit the tax because the IRS may not be able to enforce compliance on foreign sellers.
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IRS Forms: Sellers can apply for reduced withholding using IRS Forms 8288, 8288-A, and 8288-B. This process requires time and planning.
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Professional Advice: Consult a CPA or tax attorney for guidance on FIRPTA compliance.
