Under FIRPTA, when a foreign person sells U.S. real estate, the buyer generally must withhold 15% of the amount realized (usually the sales price) and send it to the IRS. Lower rates or full exceptions can apply, for example when the buyer will use the property as a residence and the price is $1,000,000 or less. The withholding is a prepayment toward the seller's U.S. tax, not necessarily the final tax owed.
What is FIRPTA?
The Foreign Investment in Real Property Tax Act of 1980, known as FIRPTA, allows the United States to tax foreign persons when they sell or otherwise dispose of U.S. real property. To make sure the tax is collected, the law requires withholding at the time of sale.
According to the IRS, the general withholding rate is 15% of the amount realized. The amount realized is generally the total of:
- The cash paid or to be paid
- The fair market value of any other property transferred
- Any liability the buyer assumes or that the property remains subject to
For most residential sales, that is effectively the sales price.
Who is responsible for withholding?
In most cases, the buyer is the withholding agent. The buyer must find out whether the seller is a foreign person, and a buyer who fails to withhold when required may be held liable for the tax.
In practice, the closing agent typically collects the withholding from the seller's proceeds at closing and coordinates the required IRS forms on the parties' behalf. That is why it is important to tell your closing agent early if any seller is a foreign person. Premier Title Solutions provides escrow and closing services for Florida transactions, and we help foreign sellers understand these steps well before closing day.
FIRPTA withholding rates at a glance
| Amount realized (sales price) | Buyer will use the property as a residence | Withholding rate |
|---|---|---|
| $300,000 or less | Yes | 0% |
| More than $300,000 up to $1,000,000 | Yes | 10% |
| More than $1,000,000 | Yes or no | 15% |
| Any amount | No (investment, rental, resale) | 15% |
For the residence rates to apply, the buyer must be an individual and the buyer or a family member must have definite plans to live in the property for at least 50% of the days it is used during each of the first two 12-month periods after the sale. If the buyer does not meet that requirement, the buyer may be liable for the withholding.
Common exceptions
The IRS lists several situations where FIRPTA withholding generally does not apply. The ones that come up most often in residential sales are:
- The seller is not a foreign person. The seller provides a certification of non-foreign status under penalties of perjury, including a U.S. taxpayer identification number.
- The residence exception. The buyer acquires the property as a residence and the amount realized is $300,000 or less, as described above.
- A withholding certificate. The IRS issues a certificate that reduces or eliminates the withholding.
Notification and documentation requirements still apply even when an exception is available, so these items should be handled with your closing agent and tax advisor.
Applying for a withholding certificate
The standard withholding is based on the sales price, not on the seller's actual gain. If the seller's expected tax is lower than the standard withholding, for example because the property sold for little or no profit, the seller or buyer can apply to the IRS for a withholding certificate using Form 8288-B.
A few practical points:
- The IRS generally acts on a complete application within 90 days.
- A seller without a U.S. taxpayer identification number can apply for an ITIN once there is a binding contract for the sale.
- If an application is pending at closing, ask your closing agent and tax advisor how the withheld funds will be handled until the IRS responds.
Because of these timelines, foreign sellers benefit from starting the conversation as soon as a property is listed, not after an offer is accepted.
When a property has more than one owner
If a property is owned by a foreign person together with one or more U.S. persons, withholding generally applies only to the foreign owner's share. The IRS allocates the amount realized based on each owner's capital contribution, and treats a married couple as having contributed 50% each. The owners cannot simply assign the entire sale to the U.S. owner to avoid withholding.
A timeline for foreign sellers
- At listing: Tell your real estate agent and closing agent that a seller is a foreign person.
- Before accepting an offer: Speak with a tax advisor about whether a withholding certificate makes sense, and confirm whether you need an ITIN.
- Under contract: Provide your closing agent with the information needed to prepare the FIRPTA documents and confirm the expected withholding amount.
- Before closing: Arrange how sale proceeds will be sent to you and confirm the instructions by phone. Never rely on wiring instructions received by email alone; read our guide to protecting closing funds from wire fraud.
- After closing: File the required U.S. tax return to report the sale and claim credit for the amount withheld.
International sellers also deal with time zones, cross-border wires and documents in a second language. Our team provides closing support in English, Spanish, Russian and French, so every step can be explained in the language you prefer.
Frequently asked questions
Is FIRPTA withholding the same as the tax I owe?
No. FIRPTA withholding is a prepayment collected at closing, based on the sales price. The seller's actual U.S. tax depends on the gain and other factors and is calculated when the seller files a U.S. tax return. If the withholding exceeds the tax owed, the seller may be able to claim a refund. Consult a tax advisor.
Who pays the FIRPTA withholding, the buyer or the seller?
The withholding comes out of the seller's proceeds, but the law makes the buyer the withholding agent responsible for collecting and remitting it. In practice, the closing agent typically handles the collection at closing. A buyer who fails to withhold when required may be held liable for the tax.
Does FIRPTA apply if the sale price is under $300,000?
Not automatically. The 0% rate applies only if the buyer is an individual who acquires the property as a residence and plans to live there for the required time. If the buyer is purchasing as an investment or rental, the 15% rate generally applies regardless of price.
How long does a FIRPTA withholding certificate take?
The IRS generally acts on a complete Form 8288-B application within 90 days of receiving all the information it needs. Missing information or a pending ITIN application can extend that timeline, so foreign sellers should start the process as early as possible with a tax advisor.
Selling Florida property from abroad?
This article is general information, not tax or legal advice. FIRPTA rules have many details, so consult a qualified tax advisor or attorney about your situation. When you are ready to plan your closing, contact our Aventura office and let us know which language you prefer.