1031 Exchange for FIRPTA

foreign tax return

1031 exchange is only for U.S. properties, but not only for U.S. citizens. Foreigners can avoid paying the dreaded 15% FIRPTA withholding tax in a 1031 exchange! When you sell a U.S. Real Property Interests (USRPI) you won't pay tax on the sale, as long as you follow the six rules of a 1031 exchange. At 1031 Exchange Connection, we're highly experienced in FIRPTA tax strategies and know how to do a 1031 exchange in compliance with IRS guidelines.

Are you interested in a legal and ethical way to defer FIRPTA tax? Call us now at 239-659-1031 now or request your free consultation to learn more. Or, if you're ready you can start an exchange online now.

How FIRPTA Works

Foreign Investment in Real Property Tax Act, or FIRPTA, is not the final tax but a withholding tax based on 15% of the gross selling price of a USRPI. Withholding is required because when property is sold, it is considered a "taxable event" and the capital gains tax must be paid with the filing of the taxpayer's tax return. The issue is that the tax return is not due until the taxpayer's year has ended, which for most foreigners is the end of the calendar year. Therefore, the IRS withholds an estimate of the tax through the FIRPTA laws, forcing the foreigner to file a tax return come the end of the year.

Avoid FIRPTA Tax With 1031 Exchange

1031 exchange is an exception to the FIRPTA and can be obtained when the foreigner applies for a withholding certificate on IRS form 8288-B before the sale. It takes a few weeks to get approved, but it's much better method to get the 15% back now, rather than have a year or more to wait to file a tax return.