Foreign Investment in Real Property Tax Act (FIRPTA)
Key Information

​Understanding FIRPTA:

When a real estate transaction involves a foreign seller, the Foreign Investment in Real Property Tax Act (FIRPTA) comes into play. This law mandates that the buyer withhold at least 15% of the purchase price at closing as a deposit against the seller’s potential tax liability. This amount estimates the capital gains taxes due, even if the property is sold at a loss. The seller may receive a refund when filing their tax return.

​

When Does FIRPTA Apply?

FIRPTA’s withholding requirement applies to transactions involving foreign sellers, including individuals and entities such as foreign corporations, foreign trusts, and single-member LLCs with foreign members. For LLCs, FIRPTA’s applicability depends on the residency status of its members. The law applies to both residential and commercial transactions, with a limited exception for residential properties under a specific dollar threshold used primarily for personal purposes.

​

Why Preparation Matters:

If the seller is foreign, it’s crucial for both parties to consult with an attorney well before closing to understand FIRPTA implications. Proper preparation can help avoid complications at closing. For instance, the withheld amount might be reduced if the seller obtains a withholding certificate from the IRS beforehand. Buyers must comply with FIRPTA to avoid significant liability. Proactively addressing FIRPTA issues benefits both buyers and sellers.

​

Get Expert Guidance:

At Abosch Law, we are intimately familiar with FIRPTA and work closely with certified CPAs and specialized accountants to ensure all aspects of the transaction are handled accurately. We will provide the legal guidance you need to help you navigate FIRPTA requirements smoothly. We manage complex real estate transactions across South Florida.

​

Benefits of Using an Attorney for Your FIRPTA Transaction:

• Ensure compliance with FIRPTA requirements and avoid legal pitfalls.

• Reduce complications and delays by coordinating with certified CPAs and specialized

  accountants.

• Obtain expert advice on reducing withholding amounts and securing necessary certificates.

• Protect your financial interests and streamline the transaction process.