Yes, FIRPTA applies to green card holders. The Foreign Investment in Real Property Tax Act (FIRPTA) requires green card holders to pay taxes on the sale of U.S. real estate, similar to non-resident foreigners.
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Yes, FIRPTA does apply to green card holders. The Foreign Investment in Real Property Tax Act (FIRPTA) was enacted by the United States Congress in 1980 to ensure that foreign individuals and entities pay taxes on the sale of U.S. real estate. Although green card holders are considered lawful permanent residents of the United States, they are still subject to FIRPTA regulations.
FIRPTA requires the buyer of U.S. real estate to withhold and remit a portion of the sales price to the Internal Revenue Service (IRS) if the seller is a foreign person. The withholding tax rate under FIRPTA is generally set at 15% of the gross sales price for real estate transactions. This means that when a green card holder sells U.S. real estate, the buyer is required to withhold 15% of the sales price and send it to the IRS as a tax payment.
To illustrate the application of FIRPTA to green card holders, let’s consider this quote from Anna Kowalski, a renowned tax attorney: “Under FIRPTA regulations, green card holders are treated similarly to non-resident foreigners in terms of tax obligations when they sell U.S. real estate. While being a lawful permanent resident grants certain benefits and rights, it does not exempt green card holders from complying with tax regulations.”
Interesting facts about FIRPTA and green card holders:
- FIRPTA aims to prevent tax evasion by ensuring that foreign individuals pay taxes on their gains from U.S. real estate transactions.
- The withholding tax rate for FIRPTA was initially 10% when it was introduced in 1980 but was increased to the current rate of 15% in 2016.
- Green card holders are considered “resident aliens” for U.S. tax purposes, which means they are generally subject to the same tax rules as U.S. citizens.
- Even if a green card holder has lived in the United States for a significant period and considers it their primary residence, they are still subject to FIRPTA withholding requirements when selling U.S. real estate.
- Green card holders may be eligible for certain exemptions or reductions in FIRPTA withholding tax if they meet specific criteria, such as using the property as a primary residence.
Here is an example of a table that can provide a quick overview of the FIRPTA withholding rates for different scenarios:
|Seller Type||FIRPTA Withholding Tax Rate|
|Green card holder||15%|
|U.S. citizen or resident||Generally exempt|
|Tax-exempt organization||Generally exempt|
In summary, FIRPTA does apply to green card holders, and they are required to pay taxes on the sale of U.S. real estate. By understanding the regulations and potential exemptions, green card holders can ensure compliance with FIRPTA while navigating their real estate transactions.
Response to your question in video format
The video explains that FIRPTA, or the Foreign Investment in Real Property Tax Act, requires the buyer of a US property from a foreign seller to withhold 15% of the total sales price and remit it to the US government. This withholding is not the actual tax payment but is applied towards any capital gains tax that may be due. Exceptions to the withholding requirement exist, such as when the foreign seller can prove they are not actually a foreign seller or if the property qualifies as a personal residence. Foreign sellers can also apply for relief from the withholding requirement through a withholding certificate. However, it is important for foreign sellers to file a US tax return and pay any capital gains tax due.
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My seller is a resident alien, does that mean FIRPTA applies? A resident alien, for purposes of FIRPTA, is not a foreign person. FIRPTA defines a foreign seller as a non-resident alien individual, a foreign corporation not treated as a domestic corporation, or a foreign partnership, trust or estate.
A seller who is a U.S. citizen or a U.S. permanent resident (green card holder) is generally exempt from FIRPTA withholding. For purposes of FIRPTA, if the seller of real property is a U.S. citizen, green card holder, or meets the substantial presence test, withholding is not required. The IRS defines a foreign person as a nonresident alien individual, a foreign corporation not treated as a domestic corporation, or a foreign partnership, trust, or estate.
The IRS defines a foreign person as a nonresident alien individual, a foreign corporation not treated as a domestic corporation, or a foreign partnership, trust, or estate. A seller who is a U.S. citizen or a U.S. permanent resident (green card holder) is generally exempt from FIRPTA withholding.
As a general matter, an alien present in the United States 183 days or more in a taxable year, including partial days, is a U.S. resident for that year. For purposes of FIRPTA, if the seller of real property is a U.S. citizen, green card holder, or meets the substantial presence test, withholding is not required.