Are you a Foreign National Thinking about Selling Property in South Florida? Let's talk about FIRPTA

As we were wrote up the contract we received a call from the sellers agent who disclosed the property was subject to Firpta tax withholding and the seller insisted the buyer should absorb the tax impact of it.

 

We work with a lot of foreign nationals and help many of them buy and sell homes here in South Florida.

 

So we know what FIRPTA is and although I'm not a CPA I understand the potential tax implications for everyone involved.

 

But a lot of people don't know what it is. Today I want to discuss FIRPTA more thoroughly.

 

FIRPTA is the foreign investor real property transfer tax act and essentially its a withholding tax.

 

We're see a lot of it right now because we have lots of foreign nationals that have come to the South Florida market and purchased homes and are now selling them for a profit.

 

Let me break this down for you… and use my experience as an example of how FIRPTA works.

 

Meet Sally Seller.

 

Sally owns a vacation property in Florida. She wants to sell it, but she's not a us citizen or a us resident. As a foreigner. She has to deal with FIRPTA.

 

Meet John Condo Buyer. He wants to buy Sallys condo. Because Sally is a foreigner, John  has to deal with FIRPTA too.

 

So what is FIRPTA ? Simply put. It's a withholding tax.

 

Withholding is an amount that is set aside to pay for potential taxes down the road.

 

Think of it as an advanced tax payment.

 

When Sally sells her vacation property, she will earn a  us income.

 

When she earns us income, she has to pay an estimated tax payment on that income,

 

The estimated tax payment will stay at the IRS until Sally files a us tax return.

 

If she ends up owing less than what was paid in advance, then she will get a refund of the difference.

 

Collecting the payment upfront is the only way the IRS can make sure that Sally files his tax return.

 

So how does the IRS go about collecting that payment?

 

Remember John, when John buys Sally's house, he will need to hold back 15% of the selling price and make a payment to the IRS on Sallys behalf.

 

If Sally doesn't, John might have to pay the 15% himself.

 

Which is exactly what we were looking at with in this situation and decided to pass.

 

A additional 15% tax premium just didn’t make sense for my clients.

 

Here's the good news if you happen to be a foreign national looking to sell, subject to FIRPTA and unfamiliar with the process we’ve got trusted tax professionals which can help you navigate the process and for buyers looking to purchase properties subject to FIRPTA we have the resources and experience to ensure you arent left holding the tax bag and know exactly what your tax exposure.

 

Over the last few years we've helped hundred of people buy and sell homes here in South Florida and we absolutely love it as 40 year Florida residents we know all the best places to fit your desired lifestyle and budget.

 

So if you’re even thinking about moving to South Florida, you've got to reach out to me.

Call, text, DM, send a carrier pigeon or smoke signal  by any means necessary because we’ve got your back when it comes to moving to South Florida.

 

📲 We have so many people contacting us who are moving here to South Florida and we ABSOLUTELY love it! If you are even thinking of moving or relocating to South Florida we can make the move and transition so much easier for you!

 

To receive our FREE South Florida Moving / Relocation Guide:

✅  http://bit.ly/SouthFloridaMovingGuide

 

To receive our FREE South Florida Buyers Guide:

✅  http://bit.ly/SouthFloridaBuyersGuide