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Level 2
posted May 22, 2024 9:29:19 AM

Firpat withholding tax

How can a tax resident but non usa permanent resident avoid firpat withholding tax when he sells a house or buy a house in usa?

 

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1 Replies
Employee Tax Expert
May 22, 2024 11:19:50 AM

Someone who meets the substantial presence test to be considered a resident for tax purposes can issue an affidavit saying that they are a non-foreign person and is not subject to FIRPTA withholding. More information about meeting the substantial presence test requirements can be found here:  Tax Tips for Resident and Non-Resident Aliens. The definition of a United States person for FIRPTA includes "a citizen or resident of the U.S." I.R.C. §§7701(a)(30)(A) 

Also, there are exceptions (or reduced rates) to FIRPTA withholding for personal residences. We have an excellent article with more information about this from the buyer's perspective -- which will help you understand what to expect as the seller. What Is FIRPTA Withholding? 

 

Finally, even if it turns out that you are subject to FIRPTA withholding, the buyer of the property will send any withheld funds to the IRS. That amount will be a "credit" to your account with the IRS. It will be used to offset any taxes due that you may owe when you file your tax return. If it turns out that too much was withheld, the difference would be refunded to you.

 

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