Question 1

What is a non-resident alien in Florida real estate?

Accepted Answer

A non-resident alien (NRA) is an individual who is not a U.S. citizen and does not meet the substantial presence test for tax purposes. NRAs can buy, own, and sell real property in Florida without restriction. However, special tax rules apply: FIRPTA (Foreign Investment in Real Property Tax Act): requires the buyer to withhold 15% of the gross sales price when purchasing real property from an NRA (the withholding is a prepayment of the NRA’s U.S. income tax on the gain), HARPTA (Florida’s version): requires the buyer to withhold 15% of the amount realized by the foreign seller at closing, and the NRA must file a U.S. income tax return (Form 1040-NR) to report the gain and claim a refund of any excess withholding.

Question 2

How does FIRPTA affect Florida real estate transactions with NRAs?

Accepted Answer

FIRPTA impact: the buyer (or buyer’s agent) must: determine whether the seller is a U.S. person or a foreign person, if the seller is foreign, withhold 15% of the gross sales price (reduced to 10% if the sales price is $1 million or less and the buyer intends to use the property as a residence), remit the withholding to the IRS (Form 8288) within 20 days of closing, and provide the seller with a withholding certificate (Form 8288-A). The seller can: apply for a reduced withholding certificate (Form 8288-B) before closing (if the expected tax liability is less than the required withholding), or file a U.S. tax return after closing to claim a refund of any excess withholding.

Question 3

What Florida-specific considerations apply to NRA property owners?

Accepted Answer

FL considerations: homestead exemption (NRAs who are Florida residents can claim homestead exemption; NRAs who are not FL residents cannot), estate tax (NRAs are subject to U.S. estate tax on U.S. real property with an exemption of only $60,000, compared to $13.61 million for U.S. citizens; this creates significant estate tax exposure for NRA property owners), title holding structures (many NRAs hold Florida property through LLCs, corporations, or trusts to mitigate estate tax exposure), and TEFRA/withholding (rental income from Florida property is subject to 30% withholding unless reduced by a tax treaty or the NRA files a tax return and elects to be taxed on net rental income).

Non-Resident Alien (NRA)

Non-Resident Aliens and Florida Real Estate

FIRPTA/HARPTA

Estate Tax Exposure

Other FL Considerations

Related Terms

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