FIRPTA Withholding for Foreign Sellers and Buyers of US Real Estate

What FIRPTA Is and Why It Exists

FIRPTA stands for the Foreign Investment in Real Property Tax Act. It is the law that makes sure a foreign person pays US tax on the gain from selling US real estate. The US generally does not tax a non-resident on most investment gains, so without FIRPTA a foreign owner could sell a US building, take the profit home, and owe nothing. FIRPTA closes that gap by treating the gain on US real estate as US-connected income and, crucially, by making the buyer collect the tax up front.

Here is the part that surprises people: the withholding is calculated on the gross sale price, not on your profit. So even if your actual tax on the gain is small, or even if you sold the property for a loss, the buyer still has to hold back a slice of the full price at closing and send it to the IRS. That is why FIRPTA can tie up a large amount of your money for a year or more unless you plan the sale before it closes. If you are also a foreign owner thinking about what happens at death, the non-resident estate-tax rules are a separate and equally important issue.

How Much Is Withheld: The 15% Rule and Its Tiers

The default FIRPTA rate is 15% of the gross sale price. On a $1,000,000 sale that is $150,000 held back at closing, regardless of what you actually netted. There are two lower tiers, but both depend on the buyer using the property as a home, and neither happens by itself:

• Full exemption, price $300,000 or less. No withholding when the sale price is $300,000 or under and the buyer (or a member of the buyer's family) will use the property as a residence for the required share of the year. The buyer signs a statement to that effect.
• Reduced 10% rate, price $300,000 to $1,000,000. Withholding drops to 10% of the gross price when the price is in that band and the buyer will use it as a residence.
• Standard 15% rate, everything else. Investment property, higher-priced homes, and any sale where the buyer will not live there.

These reductions ride on the buyer's plans, so they only help on the right kind of sale. For a foreign seller of an investment condo or a higher-end home, the realistic lever is not the tier but the withholding certificate below.

Reducing the Withholding with Form 8288-B

The main tool to keep your money is a withholding certificate, requested on Form 8288-B. You apply to the IRS before or at closing and show what your real expected tax on the gain actually is. The IRS then authorizes the buyer to withhold only that smaller amount instead of 15% of the gross price. On a sale where your true tax is, say, $40,000 but the default withholding would be $150,000, the certificate keeps the $110,000 difference in your pocket from day one.

Timing is the whole game. The application should go in well before closing, generally at least a few weeks ahead, so that the certificate is either in hand or formally in process at the time of sale. File too late and the buyer must withhold the full 15% and you are left chasing a refund. This is the single most valuable thing to plan for a foreign seller, and the reason to talk to us before you sign a contract, not after.

Recovering Over-Withholding with a US Return

If the full 15% was already withheld, the money is not lost. You recover the excess by filing a US income-tax return for the year of the sale: Form 1040-NR for an individual seller, Form 1120-F for a foreign corporation. The return reports your actual gain and tax, and the IRS refunds the difference between what was withheld and what you truly owed. The buyer reports the withholding on Form 8288 and gives you a Form 8288-A stamped by the IRS, which is your proof of the credit.

The downside is the wait. A refund through a return can take many months, sometimes longer than a year, with your cash sitting at the IRS the whole time. That is the trade-off: the Form 8288-B certificate fixes the problem before your money ever leaves the closing table, while the return route fixes it afterward. When the numbers are large, getting ahead of it with the certificate is almost always worth the effort.

If You Are the Buyer: You Are the Withholding Agent

FIRPTA puts the legal duty on the buyer, not the seller. The buyer is the withholding agent, and the buyer is the one the IRS pursues for the tax, interest, and penalties if it is not withheld and paid over. In a normal Florida closing the title company or closing agent runs the Form 8288 and 8288-A mechanics, but that does not move the responsibility off you as the buyer.

So if you are buying from a foreign seller, confirm before closing that FIRPTA is being handled and that the right amount is being withheld and remitted. Get a written FIRPTA affidavit from the seller (a US seller signs one certifying they are not a foreign person, which removes the duty), and make sure your closing agent has it. A missed FIRPTA withholding is the buyer's problem to clean up, and it is far cheaper to get it right at the table.

Foreign Buyers: How You Take Title Decides Everything

If you are a foreign buyer, FIRPTA at sale is only half the picture. The bigger question is how you take title in the first place, because that choice drives your US estate tax at death too. Buy a Florida condo in your own name and hold it until you die, and your heirs face US estate tax with only a $60,000 exemption and a graduated rate that climbs to 40%. On a $2,000,000 condo that is about $733,000 of US estate tax, paid before your family sees a dollar, plus a Form 706-NA return due nine months after death and a Florida probate.

There is no one right answer. The structure depends on three things we screen at the start: whether the property is for personal use or investment, your all-in budget over a long holding period, and whether any US family will inherit or use it. A few honest realities to know going in:

• A Florida LLC alone does not help. A single-member LLC owned by a foreign individual is ignored for US tax, so the IRS looks straight through it to the real estate. It also creates its own annual filing with a steep penalty for missing it.
• A foreign corporation can shield estate tax but costs you elsewhere. It can keep the asset out of your US estate, but it raises the tax on a future sale and removes the basis step-up your heirs would otherwise get. For personal-use vacation homes, these structures often collapse back to the economics of simply owning it directly.
• Funding matters. If a trust or holding company is part of the plan, it should be funded with cash from outside the US. Seeding it with even one share of US stock can lock it into US estate-tax exposure permanently.

For a modest personal-use home with no US heirs, the right move is sometimes to own it directly, accept the exposure, and buy life insurance to cover the eventual tax (US life insurance on your own life passes free of US estate tax). For a serious investment, a layered structure may be worth the build. This is co-counsel territory, and we walk you through it before you close. And if a loan is part of the deal, whether you are borrowing or lending, the tax result turns on how it is drafted: a clean fixed-rate loan can be tax-free to a foreign lender, while one that shares in the profits or the upside loses that and can pull the whole note into FIRPTA, see our guide to the portfolio interest exemption and the participation trap.

How We Work, and When We Co-Counsel

FIRPTA and foreign-ownership work covers a wide range, so we are honest about where our role sits. The screening that tells you what you actually face, the Form 8288-B withholding-certificate planning, the title-holding instructions to your closing agent, and the Florida documents are handled here, on flat fees quoted up front for document work. For high-net-worth foreign buyers who need a blocker or a two-tier corporation to manage estate tax and the branch-profits tax that comes with a foreign-corporation structure, we co-counsel with an international tax advisor so you get the right depth without paying for the wrong tool.

Most of this is done remotely, by phone and video, which fits buyers and sellers who are out of the country. If you are also planning around death, read the international and cross-border estate planning hub and the non-citizen estate planning guide.

Frequently Asked Questions

Common Situations

The foreign seller who sold at a small gain. An overseas owner sells a Miami condo for $900,000 that they bought for $820,000. The default 15% withholding is $135,000, far more than the real tax on an $80,000 gain. A Form 8288-B certificate filed before closing cuts the withholding to the actual expected tax, so they do not wait a year for a refund of money they never owed.

The Israeli family buying in their own names. A family in Tel Aviv buys a Naples vacation condo titled to themselves. They do not realize that at death the US would tax it with only a $60,000 exemption, and that selling later triggers 15% FIRPTA withholding. Planning the ownership structure up front, before closing, addresses both.

The US buyer who almost missed it. A buyer is about to close on a $1,200,000 home from a seller living abroad and assumes the title company "has it covered." Because the buyer is the withholding agent, a missed remittance would have landed on them. Confirming the 15% withholding and the Form 8288 paperwork before closing kept the duty satisfied and the buyer off the hook.

Sources of Law

• FIRPTA generally: IRC §897 (US real property interest treated as effectively connected income), §1445 (buyer withholding). irs.gov FIRPTA withholding
• Withholding rate and tiers: 15% of the gross amount realized; 10% for a $300,000 to $1,000,000 buyer-residence sale; exemption at $300,000 or less for a buyer-residence sale.
• Forms: Form 8288 and Form 8288-A (buyer reporting and statement), Form 8288-B (application for a withholding certificate); seller returns Form 1040-NR or Form 1120-F to recover over-withholding.
• Non-resident alien estate tax (foreign-buyer title planning): IRC §§2101 to 2108, §2104 and §2105 (situs), §2104(b) (retained-string taint); $60,000 exemption; Form 706-NA. irs.gov
• Branch-profits tax on a foreign-corporation structure: IRC §884. Florida doc-stamp tax on the deed: Fla. Stat. §201.02. (retrieved 2026-07-11)

Updated on July 16, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate planning and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about US and Florida law, not legal or tax advice, and does not create an attorney-client relationship. Cross-border tax is specialized; for high-net-worth foreign-buyer structures we co-counsel an international tax advisor. Your result depends on your specific facts.