The Foreign Investment in Real Property Tax Act (FIRPTA)

Burlington Tax Experts Assisting Canadian Property Sellers in the United States

Canadians need to know the tax implications when buying and selling property in the United States. All too often, individuals selling their American homes or properties don’t have a firm grasp of the tax rules and regulations, which results in sellers spending significantly more in taxes than needed.

The Chartered Professional Accountants at Edelkoort Smethurst CPAs LLP have superior expertise in various national and cross-border tax issues affecting individuals and corporations.

Canadian individuals and corporations are often involved with buying or selling real property such as vacation homes, parcels of land, and rental properties located in the United States. These types of transactions have tax implications in both Canada and the U.S. Our firm has the expertise, experience, and credentials to provide tax guidance and prepare your filings in Canada and the U.S. to ensure compliance and minimize taxes.

What is FIRPTA?

When a non-resident of the United States sells a property in the U.S., the IRS charges a withholding tax. The Foreign Investment in Real Property Tax Act (FIRPTA) is applied when the purchaser is a U.S. resident, but the seller is not. The buyer is responsible for paying the tax on the property, and so the amount owing is taken from the proceeds of the property to be paid to the IRS. There is no way for a Canadian or non-resident vendor to sell their U.S. property without losing a portion to FRIPTA.

How Does FIRPTA Work

For a non-resident of the U.S. selling a property in the United States, the default FIRPTA rate is 30 percent. This is the amount that the buyer must withhold from the seller’s proceeds to forward to the IRS. While as a result of tax treaties, Canadians pay 15 percent, and, as a withholding tax, sellers can also try to have all or some of the withholding tax returned when they file their taxes at the end of the year, this is still a significant and costly sum to pay upfront and can take years to get back.

How We Help

The tax experts Edelkoort Smethurst CPAs LLP have a vast knowledge of U.S. and Canadian Tax legislation as well as years of experience guiding Canadians and Canadian corporations through the essential steps of navigating the tax implications that go hand-in-hand with buying and selling property in the United States, so they achieve the best outcome in a timely manner.

When dealing with the FIRPTA withholding tax, our experienced and trusted team can submit a Request for Reduced Withholding, or Withholding Certificate, by filing the 8288 series of forms. These forms enable Canadian sellers to apply for a reduction or even an exemption from the withholding tax prescribed form the IRS.

However, a Request for Reduced Withholding must be sent to the IRS before the property closes, as it can not be filed retroactively. While the response to a Withholding Certificate is supposed to be eight weeks, sometimes it can take longer, which is why planning ahead is essential for the timeliness of your request.

Why Choose Us?

At Edelkoort Smethurst CPAs LLP, our experienced tax professionals are well-versed in U.S. tax legislation. We work closely with our clients, guiding them through the process of selling their U.S. properties step-by-step. Thus, ensuring our client’s title agent has everything needed, so our client meets their tax obligations while mitigating unnecessary expenses.

While some states that frequently process property sales from Canadian vendors are familiar with tax legislation for non-resident sellers and buyers, other states have considerably less experience. As a result, the individuals processing the sale might miss details or make significant and costly mistakes. That’s why partnering with an experienced accounting firm well-versed in U.S. tax law‘s intricacies is crucial to ensuring your tax obligations connected to the sale of your property are expedited quickly and accurately, saving you both time and money.

U.S. Tax Experts Serving Clients in Burlington and Across Ontario

If you have sold or plan to sell property in the United States, let our expert team of tax professionals help you navigate the complicated processes and legislation that non-resident vendors endure. Edelkoort Smethurst CPAs LLP can provide guidance on cross-border tax obligations and assist with all cross-border and U.S.-based tax filings. Our highly skilled CPAs serve the individuals and businesses in Burlington, Halton, and across Ontario with professionalism and a dedication to excellent service. To speak with one of our knowledgeable Chartered Professional Accountants, please contact us online or by telephone at 905-517-2297.