ALERT: 10% FIRPTA—New 15% Withholding
Under current federal law, if a foreign person sells US real property, the buyer is obligated to withhold 10% of the gross sales price and remit this to the IRS.
However, pursuant to the Protecting Americans from Tax Hikes Act of 2015, which became law on December 18, 2015 (the “PATH Act”), the required 10% withholding will increase to 15% for all closings occurring on or after February 16th, 2016, except those wherein the sales price is between $300,001 and $1,000,000 and the buyer acquires the property for use as a principal residence. Under this circumstance, a reduced withholding of 10% will apply.
Sales Price $300,000 or less and buyer acquires as principal residence
Sales Price between $300,001-$1,000,000 and buyer acquires as principal residence
All transactions—Any Sales Price and buyer NOT acquiring as principal residence