What Foreign Nationals Need to Know About Buying Florida Real Estate

What Foreign Nationals Need to Know About Buying Florida Real Estate

What Foreign Nationals Need to Know About Buying Florida Real Estate

Florida real estate has always been attractive to foreign buyers, even before the housing crash that depressed prices for both residential and commercial real estate and made foreign investment in Florida real estate a bargain for many buyers.

According to the National Association of Realtors, Florida has the largest number of foreign real estate investors in the U.S., with 41% purchasing vacation homes, 25% making a dual use purchase (vacation home/rental property) and 23% investing in rental property.

Considerations for Foreign Real Estate Buyers and Sellers

Foreign nationals are able to purchase real estate in the U.S. for personal use, either in their own names or the name of a corporation or LLC. However, when it comes to selling U.S. property, foreign nationals or entities must adhere to certain rules under the Foreign Investment in Real Property Act (“FIRPTA”).

Under FIRPTA, any profits made from the sale of U.S. property by a foreign national are subject to taxation.  There are three exceptions that would exempt the sale from taxation:

  • If the seller is a resident alien and has a tax identification number;
  • If the sale price is less than $300,000 and the buyer will use the property as a personal residence at least 50% of the time for the next two years after closing; or
  • If the seller has obtained a withholding certificate from the IRS.

If none of these exemptions apply, the buyer (or buyer’s closing agent) must withhold 10% of the sale price to pay to the IRS.

Foreign investors are also entitled to defer capital gains taxes in the U.S. by purchasing another investment property under Section 1031 of the IRS Code.  The actual tax treatment of foreign real estate buyers may depend on any existing tax treaties between the U.S. and their home countries.  This can be a complicated area, which is why it is advisable for foreign investors to consult with an experienced Florida real estate attorney.

Investment Property

Under the International Investment and Trade in Services Survey Act, foreign nationals purchasing large tracts of real estate in the U.S. must report that purchase to the U.S. Department of Commerce.

The information that must be reported includes the names and addresses of buyers, sellers and owners of more than a 50% interest, and financing information (income, expenses, etc.) about the property.  More reporting details are required for property over 200 acres or property with a purchase price of more than $1 million.

Rental Property

Foreign nationals purchasing Florida real estate for leasing purposes are subject to taxation on rental income.  Foreign landlords have a choice on how to be taxed:

  • Pay 30% of gross rental receipts; or
  • Pay regular U.S. income tax rates on net income from the property by filing a Form 4224 with the IRS.

Florida Requirements

Florida has certain filing requirements for foreign nationals and legal entities purchasing real estate here.  Any property owned by a foreign business entity or U.S. corporation whose ownership by foreign nationals exceeds 10% must have a registered Florida office and agent on file with the Florida Department of State.  If the sales tax on rents is collected, a foreign national must register as a sales tax dealer with the Florida Department of Revenue.

The attorneys at Jurado & Farshchian, P.L., combine their knowledge and experience in the South Florida real estate market with a commitment to personalized, detail-oriented legal services.  Contact one of our experienced Florida attorneys at (305) 921-0440, or email us at info@jflawfirm.com.

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Business Lawyer and Trusted Legal Advisor to Entrepreneurs, Start-ups, Small Business and Foreign Investors. Romy Jurado grew up with the entrepreneurial dream of becoming an attorney and starting her own business. And today, she is living proof that dreams really do come true. As a founder of Jurado & Farshchian, P.L., a reputable business, real estate, and immigration law firm, Romy’s practice is centered primarily around domestic and international business transactions – with a strong emphasis on corporate formation, stock and asset sales, contract drafting, and business immigration. In 2011, Romy earned her Juris Doctor degree from the Florida International University College of Law. She is fluent in two languages (English and Spanish) and is the proud author of Starting a Business in the US as a Foreigner, an online entrepreneurial guide. Call for a Consultation 305-921-0440.

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