FIRPTA Withholding Certificate
If 15% of the selling price is more than the tax you will owe on this sale, then a withholding certificate may be ideal for you.
Important features to know about withholding certificate applications:
He paid $280,000 for it back in 2015. Last year, he added a pool and made other capital improvements in the amount of $45,000. He will have approximately $25,000 in selling expenses including real estate commission. Assuming all the parties are on board, Ron has two options:
#1 – Let the buyer remit 15% of the $400,000 ($60,000) immediately after closing and then file a tax return the following year to recover any overpaid taxes, or
#2 – Apply for a withholding certificate. Based on the numbers above, the withholding can be reduced down to a percentage of the gain. In this case, the $60,000 can be reduced down to $10,000.
If Ron goes with option #2, he can get a partial refund of $50,000 in approximately 90 days after the closing. Ron still needs to file a tax return next year at which point he may be eligible for an additional refund of the $10,000 that was sent to the IRS.
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