Property tax is a wealth tax on land and real estate. Since the State of Florida, its districts, and municipalities do not collect income taxes, they are required to generate revenue in other ways. Taxes are primarily collected by the cities. Depending on the land's jurisdiction, property taxes in Miami-Dade County can range between 1.75% and 2.00% annually. Additional millage rates can be levied for limited periods by individual taxing authorities for special investments (Special Assessments). The basis for calculating these taxes is the assessed value of the property, which is determined by the County or City Tax Appraiser. Property tax is collected once a year, regardless of the owner's residency status. When and to whom is this tax paid? Generally, this tax can be paid from November 1st to March 30th. Counties offer discounts for those who pay in November, and payments are considered late after April 1st. Payments are made directly to the county where the property is located. Most counties offer the option to pay online, which is excellent for those residing outside the country.
How does it affect buyers? As a buyer, you must ensure that the withholding is carried out if the seller is a "foreign non-resident individual or foreign company not considered a domestic corporation." Otherwise, you could be held responsible for paying that withholding. How do I recover the withheld amount? In this case, you need to hire a real estate attorney or a certified public accountant who can fill out the appropriate forms and obtain the Individual Taxpayer Identification Number (ITIN). The ITIN is a number assigned by the IRS to individuals who do not have a Social Security number to determine if the seller receives a portion of the withholding since the actual tax obligation is not known at the time of closing. After submitting the requests and forms to the Internal Revenue Service (IRS), the application process can take up to 90 days. LEGAL NOTE: FIRPTA provisions are complicated and require the expertise of a real estate attorney or certified public accountant who can fill out the appropriate forms and evaluate potential implications. This information should not be taken as legal advice.
What is FIRPTA? FIRPTA stands for the Foreign Investment in Real Property Tax Act of 1980. Who does FIRPTA affect? FIRPTA affects any foreign non-resident individual and foreign companies not considered domestic corporations. From a tax perspective, when a non-resident individual or foreign corporation or partnership sells property within the United States, they are subject to FIRPTA provisions. How does it affect? At the time of closing (transaction settlement), the seller will have a withholding of 10% of the sale price for transactions under $1,000,000 and 15% if the sale price is above $1,000,000. For example, if a "foreign investor" sells property for $350,000, the closing agent (company or lawyer handling the title) will withhold $35,000 in a special account called an "escrow account" until the "foreign investor" files their income tax return in January of the calendar year following the sale. What is the difference between Withholding and Tax? Withholding is the mechanism by which the IRS (Internal Revenue Service) "forces" the individual or foreign company to file their tax return to determine if there is a gain or loss in the transaction. Once the return is filed and the IRS determines the amount to be charged as tax, the difference between the withholding and the tax is refunded to the seller. Can this withholding be avoided? It is very important to give proper attention and planning to this matter to avoid negative surprises at closing. Purchasing in your personal name or in the name of a company is one of the most important elements in the application of FIRPTA. However, it is not just the type of legal structure but the internal constitution that can make a difference. Additionally, FIRPTA is only one of the factors to consider, so it is crucial to understand the advantages and disadvantages of different purchase structures (LLC, S-Corp, Trust, Inc, etc.).
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