What FIRPTA is and who it applies to

The Foreign Investment in Real Property Tax Act of 1980 — almost always called FIRPTA — is a U.S. federal law that requires the buyer of U.S. real estate to withhold a portion of the gross sale price when the seller is a "foreign person." The withheld funds are sent to the IRS and credited against any capital gains tax the foreign seller will eventually owe.

The withholding obligation falls on the buyer, not the seller — but in practice, the closing agent or title company handles the mechanics on the buyer's behalf. If the buyer fails to withhold when required, the IRS can pursue the buyer personally for the amount that should have been withheld, plus penalties and interest. That's why title companies and closing attorneys take FIRPTA so seriously.

A "foreign person" under FIRPTA means:

• A nonresident alien individual (no U.S. citizenship and no U.S. residency under either the green card test or the substantial presence test)
• A foreign corporation
• A foreign partnership
• A foreign trust or foreign estate

Who is NOT a foreign person for FIRPTA purposes: U.S. citizens (regardless of where they currently live), green card holders, and individuals who meet the IRS substantial presence test for the tax year of the sale. If you hold a U.S. green card, FIRPTA does not apply to you — even if you live outside the United States.

The withholding rates, explained

FIRPTA does not have a single withholding rate. The rate depends on the gross sale price and whether the buyer intends to use the property as a personal residence. The withholding is calculated on the gross sale price (the "amount realized"), not the seller's profit or capital gain.

A few details that frequently trip up sellers:

• The "buyer occupancy" test is based on the buyer's stated intent at closing — that they will use the property as a residence for at least 50% of the days it's occupied during each of the two years following the sale. The buyer signs an affidavit to this effect.
• "Gross sale price" includes the full contract price, not the net to seller after commissions, closing costs, or mortgage payoff. A $1 million sale with a $400,000 mortgage payoff still results in 15% withholding on the full $1 million ($150,000).
• For multi-unit or mixed-use property, the rate is determined on the whole transaction, not each unit separately.

Exemptions and reductions

Several mechanisms can reduce or eliminate the withholding obligation:

Buyer-occupant exemptions. As shown above, owner-occupied homes at or under $300,000 are fully exempt, and homes between $300,001 and $1,000,000 qualify for the reduced 10% rate. The buyer must sign an affidavit affirming the occupancy intent — and a falsely-signed affidavit exposes the buyer to penalties.

Non-foreign certification. If the seller is in fact a U.S. person (citizen, green card holder, or substantial-presence resident), the seller can sign a non-foreign affidavit at closing certifying their status. This eliminates the withholding entirely. Title companies almost always request this affidavit from every seller as a matter of routine.

Withholding certificate from the IRS (Form 8288-B). A foreign seller can apply to the IRS for a reduced or zero withholding certificate based on their actual expected tax liability on the sale. For example, if the seller bought the property for $900,000 and is selling for $1,000,000, the actual gain is only $100,000 — but standard FIRPTA withholding would take $150,000 (15% of the gross). Form 8288-B requests that the IRS authorize the closing agent to withhold only the amount of actual tax owed, freeing up the rest.

Tax treaty provisions. The United States has bilateral tax treaties with many countries. Some treaties allow foreign sellers to claim reduced rates on capital gains. Treaties generally do not eliminate FIRPTA withholding at closing — they affect the final tax owed when the seller files their return, which then determines the refund.

Publicly traded REIT exception. If the property being sold is shares in a publicly traded U.S. REIT (not a typical residential transaction), different rules apply.

Forms 8288, 8288-A, and 8288-B

Three IRS forms govern the FIRPTA process:

Form 8288 — U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests. This is filed by the buyer (or the closing agent on the buyer's behalf) within 20 days of the closing date. The form reports the transaction to the IRS and is accompanied by the withheld funds. Missing the 20-day deadline triggers penalties and interest on the buyer.

Form 8288-A — Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests. This is a statement attached to Form 8288. The IRS stamps a copy and returns it to the seller. The seller then uses this stamped 8288-A as proof of withholding when filing their U.S. tax return to claim credit for the amount withheld.

Form 8288-B — Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests. This is filed by the seller (or by the buyer or closing agent on the seller's behalf) before or on the closing date, requesting that the IRS authorize reduced or eliminated withholding based on the seller's actual expected tax liability. The IRS typically responds within 90 days. If filed before closing and an 8288-B is pending, the buyer's obligation to remit the withholding is paused until the IRS issues its determination.

Filing the 8288-B before closing is often the most valuable step in a FIRPTA transaction. It can convert a $150,000 withholding into a $15,000 (or even zero) withholding — but it requires planning ahead. Once closing has happened and the funds have been sent to the IRS, recovering the excess requires filing a full U.S. tax return and waiting for a refund.

How to recover withheld funds

If the amount withheld exceeds the actual tax owed on the sale, the seller is entitled to a refund of the difference. The recovery process:

1. Wait until after the tax year ends. Refund claims are made on the seller's U.S. tax return for the year the sale closed.
2. File the appropriate tax return. Individual foreign sellers file Form 1040-NR. Foreign corporations file Form 1120-F. Foreign partnerships and trusts have their own forms.
3. Attach the stamped Form 8288-A. This is the document the IRS returned to confirm the withholding. Without it, the seller cannot claim the credit.
4. Wait for processing. The IRS typically processes FIRPTA refund returns in 6 to 12 months. During peak filing season, longer waits are common.

Many foreign sellers don't have a U.S. Individual Taxpayer Identification Number (ITIN). An ITIN is required to file a U.S. return. If the seller doesn't have one, they apply using Form W-7, which can be filed together with the tax return. Without an ITIN, the refund cannot be processed.

A real Miami example: an $850,000 condo sale

A Brazilian national owns a Brickell condo purchased in 2018 for $700,000. In 2026, they sell it for $850,000 to a U.S. buyer who plans to use it as a vacation home (not a primary residence).

Standard FIRPTA withholding at closing:

• $850,000 sale price falls in the over-$300,000-buyer-occupant bracket — but the buyer is not occupying it as a residence
• Therefore: 15% withholding = $127,500 sent to the IRS at closing

Actual capital gain:

• Sale price: $850,000
• Original cost basis: $700,000
• Improvements over the years: $20,000
• Selling costs (commission, closing): $55,000
• Net gain: $75,000
• Federal long-term capital gains tax at 20%: $15,000

The gap:

• Withheld: $127,500
• Actually owed: $15,000
• Refund due: $112,500

With Form 8288-B filed before closing:

• The seller's tax professional applies to the IRS to authorize withholding equal to the actual expected tax ($15,000)
• The IRS reviews and issues a withholding certificate
• Only $15,000 is withheld at closing; the seller keeps the additional $112,500 in their hands instead of waiting 6-12 months for a refund

This is the single most important reason foreign sellers should work with a broker and tax professional who understands FIRPTA before they go under contract.

FIRPTA and LLC or entity-owned property

Foreign nationals often hold U.S. real estate through entities — single-member LLCs, multi-member LLCs, foreign corporations, or trusts. FIRPTA's application depends on the entity type:

• Single-member LLC owned by a foreign person: The IRS treats this as a "disregarded entity." For FIRPTA purposes, the foreign owner is treated as the seller, and the standard 15% withholding rules apply.
• Multi-member LLC or partnership with foreign partners: Complex rules apply. The withholding can be allocated based on the percentage of foreign ownership.
• Foreign corporation: The full 15% withholding applies. The corporation must file Form 1120-F to claim any refund.
• U.S. corporation with foreign shareholders: If the entity is a U.S. corporation (not a USRPHC), FIRPTA generally does not apply at the sale. Instead, FIRPTA may apply when the corporation distributes proceeds to foreign shareholders.

The USRPHC (U.S. Real Property Holding Corporation) rules are technical and outside the scope of this guide. If your property is held in an entity structure, consult a qualified U.S. tax professional before you list.