Foreign Investor Real Property Tax Act – Sellers

UNITED STATES TAXES AND THE FOREIGN SELLER

FIRPTA – Foreign Investment In Real Estate Property Tax Act

FIRPTA is the law that allows potential income tax money to be withheld from foreign citizens when they sell property in the United States. This Foreign Investor Act first became law in 1980. (26 USC § 1445 et. Sec.). Because FIRPTA excludes property under $300,000, it was not addressed ofter in Nevada. If FIRPTA affects you, we can apply for a seller exemption where the IRS may lower or eliminate the withhold amount. The 15% of THE SALES PRICE withheld from the Seller is a lot of money! If you are a Foreign Person wanting to sell Nevada Real Estate, call or text us at 702-788-8822 to minimize your withhold amount

FIRPTA Exemptions

You may owe more money for a home loan than you’ll realize from the property’s sale. Have you lost money and need to do a Short Sale? A bank will not approve a short sale unless the IRS withhold is paid by you. How can you sell your property without bringing a lot of cash to closing? You need to hire us to be your Realtors. We guide you through applying for an IRS exemption.

WHAT TO DO NOW?

  • Meeting with us to strategize a plan for you to sell your property comes first
  • Asking the IRS to minimize or cancel the withhold amount is the next step. Because the IRS must respond within 90 days, we can also start the property listing process  
  • An IRS exclusion will waive the withhold, allow less than 15% to be withheld or make an agreement substituting another asset 
  • If the IRS rejects your exclusion request, you will have 15% of the sales price withheld at closing. If more money is needed you will need to provide funds to finalize the sale

Reasons To Approve an Exclusion

The IRS may make an agreement to substitute a different asset waiving the withhold. Also, if you are selling the property at a loss, the 15% withhold amount exceeds this year’s tax liability or if you are gifting your profit to a spouse, the IRS typically grants the exclusion request.

Other FIRPTA Exemptions 

Professional Athletes and Foreign Government-Related people are exempt from FIRPTA. Students, Teachers, Trainees and their Dependents who have lived in the U.S. for over 5 years are also exempt.”Substantial Presence” exempts people who have lived in the U.S. for over 31 days “this year” AND 183 days in the last three years. The “days” are counted this way: each day you were present in U.S. this year count as one. One day for every 3 days present counts as one for last year and one day for every 6 days present for the year before. If you meet the 31 day rule AND the 183 day rule you are exempt.

How Do You Get Your Money Back?

You get your withheld money back if you are owed a tax refund after filing a standard U.S. Tax Return.

 

 

DISCLAIMER: I know about the FIRPTA rules because I sell Foreign People’s Real Estate for them in Las Vegas, Nevada. Because I am not an Accountant or Attorney, I am unable to provide tax or legal advice. Therefore, if you have any questions, please seek professional advice. I’m always happy to sell your home or find you a good investment property!

Blog written by Terri Capodieci Grosse. Terri has sold real estate in Las Vegas since 1993 and is a principal of www.HomesForSale.Vegas  Feel free to give Terri a call or text her at 702-788-8822