Florida Real Estate Taxes - Withholding Tax on Real Estate Sales as Non-US resident
As a Non-US resident - if you are selling US Property you are subject to a 15% Withholding TAX (FIRPTA) deducted from the selling price of the property and payable to the US tax agency. The withholding Tax is used to cover capital gain tax resulting from the sale of the property.
The title company handles the settlement of the sale and is taking care of withholding and payment of the tax. However, the buyer of the property has the ultimate responsibility for withholding and payment of the tax. The tax payment must be made by the 20th day after the closing. If the tax payment is delayed significant penalties will apply.
In order to issue the tax payment to the tax agency it is very important that the seller of the property has a US Taxpayer ID number (ITIN) or that a US Taxpayer ID application will be filed.
If the purchaser of the property is not a US resident he will need a US Taxpayer ID number as well for payment of Florida real estate taxes.
The Withholding Tax can be avoided if the selling price of the property does not exceed $ 300,000 and the purchaser of the property is willing to sign a "buyers' affidavit". However the buyer is subject to certain conditions in order to sign the "buyers' affidavit". If the buyer of the property is not willing or able to sign the “buyers’ affidavit” 15 % withholding tax is due.
However, under Section 1445(a) of the Internal Revenue Code if an individual Transferee acquires a U.S. Real Property Interest for use as a residence AND the amount realized on the transaction exceeds THREE HUNDRED THOUSAND DOLLARS ($300,000.00) but does not exceed ONE MILLION DOLLARS ($1,000,000.00) the amount to be withheld is 10% of the amount realized, but only if the buyer signs the “buyers affidavit, otherwise the withholding amount remains 15%.
If the amount realized is over the $1,000,000 amount than 15% of the amount realized will be withheld and paid to the Internal Revenue Service.
The withholding tax can be reduced if an application for a "Withholding Certificate" is submitted to the tax agency on or before the date of the property transfer. With his application the expected gain of loss on the sale of the property will be reported to the tax agency. According to the expected gain the tax payable will be stated. In case of a loss no tax will be due.
At closing the title company will retain the 10% or 15% Withholding Tax. As soon as the tax agency issues the Withholding Certificate the title company can release the overstated amount of Withholding Tax to the seller and only the tax due will be paid to the tax agency.
If you intend to sell your property, please contact Davis & Associates for a detailed consultation.
Davis & Associates
Fluent in English and German
28901 Trails Edge Blvd. # 205
1402 Cape Coral Pkwy E.
As a customer of Davis & Associates for many years it is my pleasure to recommend the services provided by Davis & Associates.
Please find above their contact information for a consultation.
Kirsten S. Prizzi
FL Lic Real Estate Broker Associate / Realtor
Immobilienfachwirt (IHK) / Immobilien Florida
Waterfront Realty Group INC.
1395 3rd Street S, Naples, Florida 34102