Tuesday, May 24, 2016

What is FIRPTA?

This week’s question comes from a foreign investor in Aventura, Florida. 

Dear Sigal,

What is the Foreign Investment in Real Property Tax  Act ( FIRPTA) ?

I am an Israeli residing in Aventura, Florida. Several years ago I purchased a luxury condo in Aventura. At the time of the acquisition, I was not informed of this Act, the Foreign Investment in Real Property Act. 

Now, I am seeking to sell my investment, and I have been informed I am liable to pay the United States government at the time of closing. Please explain this law to me.


The Foreign Investment in Real Property Tax Act of 1980 was enacted as a result of concerns that foreign investors, such as yourself were purchasing real estate in the United States , making a profit and not contributing to our tax base. 

To solve this problem, FIRPTA created a general requirement that at the time, 10%  was held back at the sale of the unit for taxes. 

There have been changes to this law as follows:

Just this month, May 2016 the amount charged has increased to 15%. It is worth noting that this increase only affects properties over $1 million. 

Properties under the sales value of  $300,000 are not subject to this tax, provided the luxury real estate property in Aventura real estate is used for personal use, such as a second home/vacation property 

As with all legal matters, I suggest you contact an attorney or at least the government agencies below:

For further information, please contact:
Evan M. Liddiard, CPA
Senior Policy Representative, Federal Taxation
NAR Government Affairs
[email protected](link sends e-mail)
Finley Maxson
Senior Counsel
NAR Legal Department
[email protected](link sends e-mail)
You can also visit the National Association of Realtors® website for further details on FIRPTA

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