David Fite of The Fite Group Luxury Homes Shares Insights on U.S. Tax Regulations and Impact on Foreign Real Estate Buyers at the 12th Annual Luxury Real Esate International Symposium
Posted by Nadine Fite — January 17, 2018
LONDON, UNITED KINGDOM - David Fite, of The Fite Group Luxury Homes, headquartered in Palm Beach, FL, was a featured speaker today at the 12th Annual International Symposium for Who’s Who in Luxury Real Estate, held in London, United Kingdom.
Speaking on the topic of U.S. Tax Regulations and their influence on real estate transactions, Fite discussed the recent U.S. tax overhaul by the Trump Administration, including the curtailing of state income tax breaks and the impact that change is having on the residential real estate market in the U.S, as well as U.S. tax regulations as they pertain to foreign investors.
Fite explained that under the former tax code, U.S. citizens could deduct the amount paid in state and local income taxes, including property taxes, from their federal tax return. However, under the new tax plan, taxpayers may only deduct up to $10,000 in total. Previously, interest on mortgage debt up to $1 million could also be deducted, across multiple properties. But under the new tax plan, interest paid on mortgage debt up to $750,000 can be deducted on a primary residence only.
While the actual impact of these tax code changes on real estate has yet to be determined, it is expected that homeowners from states with high income taxes, such as New York, Connecticut, Massachusetts and California, will migrate to states that do not charge state income tax, such as Florida. Fite shared that this shift is already being felt at The Fite Group Luxury Homes as many prospective buyers began vetting properties in the Palm Beach County market over the recent holidays. The luxury marketing in Palm Beach County includes many second-home buyers and Florida’s lack of state income tax is expected to be even more compelling to potential buyers now that the new deduction limits are in place as of the new year.
While these new tax code changes do not directly affect foreign buyers or sellers of U.S. properties, these individuals are subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Under this code, foreign investors are subject to income tax withholding on dispositions of interests in U.S. real estate. As a mechanism to ensure the collection of tax from foreign taxpayers, FIRPTA requires the buyers of U.S property priced over $300,000, previously owned by the foreign national, to withhold 15% of the sales price. This 15% withholding is considered a deposit that will be applied to the actual tax which is calculated when foreign nationals file a U.S. income tax return. Under certain circumstances foreign sellers can apply to the Internal Revenue Service for a reduction in the amount of withholding from 15% to 10%.
During his presentation to leading real estate professionals from Europe, Asia and South America, Fite explained that there are multiple ways to structure purchases of U.S. real estate by foreign nationals. The use of a foreign corporation, U.S. corporations and/or limited liability corporations can help the foreign national achieve limited legal liability, estate tax and asset protection, lower taxable income on sale of U.S. real estate and minimal double taxation. Fite closed his remarks by recommending buyers consult a U.S. tax accountant prior to purchasing real estate in the U.S. so the most favorable deal structure can be put in place at the onset.
About The Fite Group:
For almost a decade, The Fite Group Luxury Homes has represented buyers and sellers of luxury properties throughout the Palm Beaches. With four offices and nearly 120 agents, the firm has completed more than $4 billion in sales since its founding by tapping into the team’s exceptional local knowledge and unparalleled committed to providing the highest levels of service. A market leading boutique firm with global capabilities, The Fite Group Luxury Homes is known for prioritizing relationships over transactions and people over properties. Their strong local brand distinguishes The Fite Group in the markets they serve while a vast global referral and distribution network provides even greater value to their clients. Headquartered on Palm Beach Island, the firm has additional offices in Delray Beach, Wellington and Palm Beach Gardens, Florida. For more information visit www.FiteGroup.com.
About Who’s Who in Luxury Real Estate:
A worldwide collection of top brokers representing the finest luxury properties across the globe, Who’s Who in Luxury Real Estate has been leading the real estate industry since 1986. This hand-selected group of more than 130,000 professionals with properties in more than 70 countries collectively sells over $300 billion of real estate annually, making it the most elite and comprehensive luxury real estate network in the world.
Who’s Who in Luxury Real Estate’s global network is showcased on LuxuryRealEstate.com, which remains the #1 portal for luxury properties on the web and has more $1,000,000+ content than any near-peer. The company has been recognized as a leader in the industry by Forbes, The Webby Awards, Web Marketing Association, Maggie Awards, ADDY Awards, the Inc. 5000 List, and more.