When buyers need to withhold tax on the seller’s behalf
07/29/2014 | Author: TAR Legal Staff
If I buy property in Texas from a foreign owner, do any special rules apply?
Your transaction may be subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
If the sales price of the property is $300,000 or less and you or a member of your family will reside in the property at least 50% of the time during the first two years of ownership, you can ignore FIRPTA.
If the property’s sales price is greater than $300,000 or you have no plans to reside at the property, FIRPTA applies. Determine whether the seller will realize any gain from the transaction—in other words, will the seller walk away from closing with any money? If so, you must withhold 10% of the amount realized by the seller—usually the sales price—for federal taxes.
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