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Sale of US Real Estate by non-US Persons.

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Top 5 Tips for Foreign Persons Selling US Real Investments You sell your home or real estate investment in the US.   You expect to receive all of your proceeds but the title company hands you a piece of paper – 1099-S anyone? – instead of 15% of your money.   What do you do now? Back in 1980, the US Congress passed a law (called FIRPTA) which requires a buyer to retain 15% of what is due to a seller of real estate if the seller is not a US person (meaning a US citizen, a “green card” holder or otherwise a resident).   The US wants to collect tax on these sales and believe that many non-US persons may not file a US tax return (and pay the tax) unless they have an incentive to do.   Thus, they required that 15% of the sale proceeds be withheld. The title company or buyer is required to withhold this amount (unless you present it with a certificate, which we describe in #5 below) and remit it to the IRS (except in certain circumstances which we also describe in #5 b...
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U.S. citizens and resident aliens (“green card” holders) must pay taxes on worldwide income.

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This means that, even if they do not live in the US and earn income outside the U.S., they must  (1) file an annual tax return AND ( 2) pay taxes on any income they earn (regardless of where they earned it). But there is some relief. Congress allows U.S. citizens and resident aliens not to pay Federal income taxes on up to US$105,900 of foreign earned income per year for 2019. But, be careful – it does not apply to all income and does not exempt them from all taxes. They can only exclude foreign earned income (such as wages and other compensation for services performed outside the U.S.). Also, the exclusion only applies to income tax. Payroll taxes (social security and Medicare) are not reduced by this exclusion. Similarly, depending on their state of domiciliation or residency, State income taxes may not be reduced by this exclusion. Finally, there are additional requirements they must meet to avail themselves of this exclusion. In particular, to qualify for the exclusion, they mu...
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