As more and more Canadian’s and international investors flock to the beautiful Valley of the Sun for affordable real estate prices and beautiful golf communities, I am often asked the question:

  • Do foreign real estate investors have to worry about any special taxes when buying a home in Arizona?

The answer is yes. There are special taxes foreigners need to watch out for when purchasing real estate in Arizona or anywhere in the United States. Under the Foreign Investment in Real Property Tax Act (FIRPTA), 10% of the sales proceeds must be held at closing by the escrow company and paid to the Internal Revenue Service (IRS). Visit http://www.irs.gov/businesses/small/international/article/0,,id=105000,00.html for more details.

There are also some exceptions which are also important to be aware of. Visit http://www.irs.gov/businesses/small/international/article/0,,id=102254,00.html for more details on exceptions to FIRPTA.

One special exception to be aware of is there is no requirement for 10% tax withholding if the sale price of the home is $300,000 or less, and the buyer will occupy the home. This should be a very common situation now in Arizona with real estate prices down.

About FIRPTA

FIRPTA was enacted in 1980. There is a nice overview found on Wikipedia http://en.wikipedia.org/wiki/Foreign_Investment_in_Real_Property_Tax_Act

If you still have any questions about FIRPTA and the tax ramifications when international investors are buying Arizona real estate, we advise you to consult your accountant or a professional tax advisor. Feel free to call a member of the Keith Jackson Realty Team at 480-363-2019 or email us at keith@golfprorealty.com and we would be happy to help you find a home, parcel of land, or investment property that meets your investment needs.