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Understanding FIRPTA

FIRPTA stands for Foreign Investment in Real Property Tax Act and it is the Federal law governing the taxation and withholding by foreign persons selling US real estate. 

Under FIRPTA, the title company is required to withhold 15% of the gross sales price from proceeds as a “deposit” due to IRS within 20 days after closing; when purchasing from a foreign seller (certain exceptions apply).

The seller can file forms with the IRS to receive a refund.  It most cases they receive a full refund.  Below is a calculator you can use as an estimate.  This tool should be used only as a guide.  DVC Sales does not provide any tax advice.  Consult a FIRPTA expert or the Internal Revenue Service.

Example of our understanding how to calculate the taxable income:

Buying
Selling
Contract Price
Real Estate Commission
Closing Costs paid when buying and selling
Estoppel and Recording Fees
Certified FIRPTA agent fee
Amount sent to the IRS (15% of the selling price)
Net to Seller at Closing
The income that the seller should expect to pay taxes on
Tax payment due to IRS (assuming 20% rate)
Estimated Refund
Percent of FIRPTA withholding returned to the Seller

Nancy Carpenter, AFSP
Foreign Investors Tax Services LLC
FIRPTA Specialist
ITIN Certified Acceptance Agent (CAA)
Tax Returns for Foreign Investors & Tax Refunds
P.O. Box 722 Intercession City, Florida 33848
Phone (407) 301-0638
Fax (407) 308-0648
Email nancy@fitaxes.com
Web address: fitaxes.com
Skype user name – nancyfits
Deejay & Associates, Inc.
2807 N Poinciana Blvd.
Kissimmee, FL 34746
Office (407) 396-7522
Fax (407) 396-6884