The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) is a congressional act that was passed because foreigners were selling property in the U.S. and not paying taxes or capital gains taxes on the sales. Richard’s goal is to simplify the FIRPTA process as much as possible and raise awareness about transactions dealing with foreign nationals.

Because foreign nationals are not subject to U.S. tax laws, FIRPTA requires buyers to withhold a percentage of the property sale to pay to the IRS – not taking this withholding following a transaction can result in an IRS penalty of 5% of the transaction’s value per month for up to 5 months.

Originally, this withholding amount was set at 10%, but during the Obama administration, the rate was changed to 15% under the Debt Reduction Act. The goal of raising this rate was to ensure there were sufficient funds to pay outstanding taxes on any transaction that occurred involving a foreign seller.

We go into further detail about what FIRPTA is and how it affects both buyers and sellers involved in the U.S. real estate market in this episode. Make sure you give it a listen, especially if you’re involved in real estate, and check back soon to see when our next episode goes live.

Richard Kahn of FIRPTA Refunds