It stands for Foreign Investment In Property Tax Act. Whenever a foreign owned property is SOLD in the USA, including Arizona, FIRPTA is triggered, and 10% of the sales price is required to be withheld by the buyer/escrow agent. This is to help ensure the IRS’ collection of the seller’s capital gain tax. There are however some exceptions where FIRPTA does not apply. These include but are not limited to,
- Being a U.S. citizen or dual citizen
- If you are a BUYER, FIRPTA only applies to foreign sellers
- If the property is your primary residence (you are required to live in the property 50% of the number of days for two 12 month periods) and the contract price is less than $300,000 (You will still be required to pay capital gains tax however)
- If the foreign owned property owner files the IRS Form 8288-B, they may qualify to minimize or remove the 10% withholding
* Interested buyers and sellers should reach out to an accountant or lawyer for future information. Please visit https://www.irs.gov/individuals/international-taxpayers for more information.