FIRPTA for Canadians Selling U.S. Real Estate

What is FIRPTA?

The Foreign Investment in Real Property Tax Act (FIRPTA) is a tax law that imposes U.S withholding tax on foreign persons selling U.S. real estate. Under FIRPTA, the buyer is required to withhold 15% (with some exemptions) of the full sales price of the sale when purchasing from a foreign seller. This withholding must be remitted to the IRS within 20 days after closing.

The Internal Revenue Service (IRS) enforces FIRPTA to ensure the U.S. tax authorities are able to collect any tax obligations on foreign persons. Without FIRPTA, the government would have no concrete means of collecting what they are potentially owed. As a solution, FIRPTA authorizes the United States to tax foreign persons on dispositions of U.S. real property interests. The taxpayer must then file a US tax return for the disposition of the property and settle any FIRPTA obligations related to gains on the disposition.

The IRS holds the buyer of the property fully liable for the full amount of the FIRPTA withholding on the disposition of the sale.  In this context, the term disposition includes, but is not limited to, a sale or exchange, liquidation, gift, transfers, redemption, etc.

Contact us by filling out the form at bottom of page and we will get back to you within 1 business day.

Some Common Situations for Exemption or Reduction:

There are some circumstances under which the withholding can be exempted or reduced by filing Form 8288-B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests)

  1. The sale price is $300,000 or less and the buyer is an individual who will attest to and certify to occupy the property 50% or more in the 2 years following the closing of the sale.
  2. The sale price is $300,001 up to and including $1,000,000 and the buyer is an individual who will attest to and certify to occupy the property 50% or more in the 2 years following the closing of the sale. In this case, FIRPTA may be reduced to 10% withholding.
  3. The seller is either exempt from tax or non-recognition of the sale applies
  4. The maximum tax liability is less than the tax required to be withheld. Under this scenario, the taxpayer may have a loss on the sale of the property or a very small gain, and the FIRPTA tax would far exceed the tax liability.

It is important to understand Form 8288-B must be filed prior to closing and the FIRPTA amount is held in escrow until the IRS adjudicates the claim, which can take 90 days or more.

Contact us by filling out the form at bottom of page and we will get back to you within 1 business day.

Can I have the FIRPTA Withholding Refunded?

Canadians selling US real estate must file a US federal tax return (Form 1040NR) and a state tax return, if applicable, regardless of the gain or loss on the disposition.  This sale must also be reported on your Canadian tax return and the gain or loss calculated.

The FIRPTA withholding may be refunded in whole or in part depending on the amount of the gain or loss on the transaction in relation to the amount withheld.

Contact us by filling out the form at bottom of page and we will get back to you within 1 business day.

How Can Platinum Bookkeeping & Tax Help You?

Our team has the experience to assist you in navigating the various stages of the sale of your US property and filing the applicable FIRPTA compliance and/or withholding certificate forms.  We will work with your title or escrow company and support them with the appropriate documentation related to FIRPTA.

Once your property sale has closed, we can also assist you with obtaining your Individual Taxpayer Identification Number (ITIN) as we are Certifying Acceptance Agents (CAA) for the IRS and are authorized to authenticate your identity and identity documents (passport) by the Internal Revenue Service.

Upon issuance of your ITIN, we will file your federal, and if applicable, state returns at the appropriate time for the disposition of your property.  Subsequently, as this also needs to be reported on your Canadian tax return, we can assist with this filing.

Why is it so important to get an ITIN?

Our FIRPTA team will handle your transaction from the time of sale through to all applicable tax filings on both sides of the border.

Contact us by filling out the form at bottom of page and we will get back to you within 1 business day.

Platinum Bookkeeping and Tax gave me excellent service in preparing and filing my USA and California tax returns. They were very knowledgeable and professional. I would definitely recommend them – David W

David W.

Very knowledgeable about preparing our tax returns.

Brian T.

Asif returned calls quickly and made timely appointments to meet my needs. He is very knowledgeable about owning property in the US and is a great resource! Asif went through my U.S. tax return with me explaining each element – I was grateful for this service! I wouldn’t hesitate to recommend Platinum Bookkeeping and Tax to others.

Tracey D.

Asif was highly knowledgeable, incredibly professional and worked toward effective solutions to a couple glitches we ran into with the sale of our US property. In less than 24 hours he had 2 ITIN’s, two US tax returns and 3 Canadian returns done for us. His instructions were clear and concise, there were no questions about what we needed to do to finalize the paperwork. The process was incredibly easy and seamless. Would highly recommend this company for your tax needs.

Coral U.

Great experience with Asif when helped us with our W7 application and answered capital gains and FIRPTA questions. Great service. Would highly recommend!

Colin M.

Contact Us Today

Foreign Investment in Real Property Tax Act