January 15th, 2016
‘Foreign investment changes coming’
By: York Real Estate Group
In December, Congress acted to ease the way for foreign investors--but also to increase the withholding rate on foreign sales. The revised law, called the Foreign Investment Real Property Tax Act or FIRPTA, falls under the 2015 Protecting Americans from Tax Hikes (PATH) Act.
This ruling requires investors from other countries to pay income tax whenever they sell U.S. property. It was first passed back in 1980 due to fears that foreigners would snap up large parcels of American land, and many real estate experts have long deemed some of its provisions outdated and too limiting. They hope the changes will bring in millions in new foreign investments by allowing foreign pension funds--one of the largest sources of international monies coming into the U.S.--to sell property without paying taxes.
In a counter measure to help maintain some of the lost tax revenues, the law also authorizes the IRS to boost the FIRPTA buyer's withholding at closing from its current rate of 10% to 15% of the gross sale price. (There is an exemption for the purchase of a personal residence costing less than $1 million.)
The new rate will go into effect on February 16th, 60 days after the President signed the law. Any real estate professionals who have contracts pending with foreign sellers right now would probably want to aim for a closing date prior to that, if at all possible. If you have any questions or concerns about the details of your buying or selling, domestic or foreign, just give us a call.
Real Estate News Blog: www.YorkRealEstateGroupSWFL.com
York Real Estate Group consists of James, Michael, and Morgan York, Florida Realtors with Downing-Frye Realty. James York is the winner of the prestigious 2014 and 2015 SWFL People’s Choice Realtor Award. The group has over 25 years combined experience and over $250 million in sales transactions. Visit The York Group website at www.naplesyorkrealestate.com for all current MLS listings of houses for sale in Naples, Marco, Bonita, and Estero. If you have other questions, the Yorks invite you to email or call them at JYorkinFL@cs.com or 239-273-6727.