Skip to main content

FIRPTA Tax Withholding Set to Increase Effective February 16, 2016

Beginning on February 16 of this year, the rate of tax withholding required by the Foreign Investment in Real Property Tax Act (FIRPTA) will increase from 10% to 15%.  FIRPTA imposes federal tax on the sale of an interest in real property located in the United States by a foreign seller.

To ensure that FIRPTA taxes owed are collected, buyers who are purchasing a real property interest from a foreign seller will now be required to withhold 15% of the purchase price.  The increase in the withholding rate is the result of the recently enacted Protecting Americans from Tax Hikes (PATH) Act, which was signed into law in December 2015.  When purchasing real property in the United States, it is imperative that a buyer find out if the seller is a foreign person as defined by FIRPTA.  A buyer who fails to withhold at the new 15% rate after February 16 may be held liable for the taxes owed by the IRS.

Read this bulletin from the National Association of Realtors for a more detailed discussion of FIRPTA and the changes brought about by the recent PATH Act.

Subscribe To Viewpoints

Author

Peter P. Gelzinis is a Mintz Associate who counsels clients on real estate transactions, including acquisitions, dispositions, financing, and leasing. Before joining Mintz, he served as Law Clerk to the Honorable Keith C. Long of the Massachusetts Land Court.