Are you a non-US resident thinking about selling your home?
If so, you’re not alone and you wouldn’t be the first.
Because the Washington DC area is such a melting pot, many folks have come into the country on a green card, bought property, and moved out of the country before having a chance to sell.
Your property may be sitting vacant or there might be a renter occupying it.
When you are ready to sell, that’s where FIRTPA comes into play.
Note: It’s highly recommended you consult with a CPA expert in this field to get additional info on your specific situation and how the tax law affects you.
What is FIRTPA?
FIRTPA stands for the Foreign Investment in Real Property Tax Act.
The tax is applicable only to non-residents of the United States who own property.
Here’s part of what the IRS website has to say:
Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 15% (10% for dispositions before February 17, 2016) of the amount realized on the disposition (special rules for foreign corporations).
The withholding is 15% of the GROSS sales price if the sale is over 1M and 10% if under 1M.
Note that if the sale is for under 300K AND the buyer will be using the property as his or her primary residence, there is no withholding.
To read more about the FIRTPA withholding, click here.
FIRTPA – The Skinny
Long story short.
If you’re a non U.S. resident selling a property in Maryland – or you’re buying a property FROM a non-US resident – it’s imperative to understand the tax liability involved for all parties, as well as the tax withholding that must take place by the title company at settlement.
Without doing proper due diligence, the sale of your property could be extremely stressful – or worse yet, never take place.