FIRPTA: What Foreign Property Sellers Must Know
If you are a foreign national selling US real estate, FIRPTA requires the buyer to withhold a percentage of the sales price and remit it to the IRS. Understanding this rule before you list is essential.
Financing & Taxes · Sea to Sky Realty
What Is FIRPTA?
FIRPTA — the Foreign Investment in Real Property Tax Act — is a US federal law that requires buyers to withhold a portion of the purchase price when buying real estate from a foreign seller. The withheld amount is sent directly to the IRS as a prepayment against any capital gains tax owed by the seller.
Who Is a Foreign Seller Under FIRPTA?
For FIRPTA purposes, a foreign seller is any individual or entity that is not a US person — meaning not a US citizen, not a green card holder, and not a US-resident alien who meets the substantial presence test. Most European nationals selling Florida property will be subject to FIRPTA.
Withholding Rates
- 15% of the gross sales price: standard withholding rate for most transactions
- 10% of the gross sales price: applies when the sales price is $300,000 or less AND the buyer intends to use the property as a primary residence
- 0%: applies when the seller obtains a Withholding Certificate from the IRS reducing or eliminating withholding
FIRPTA withholding is calculated on the gross sales price — not the gain. On a $600,000 sale, the standard 15% withholding is $90,000, regardless of what you originally paid for the property. If your actual tax liability is lower, you recover the difference by filing a US tax return.
The Withholding Certificate
Foreign sellers can apply to the IRS for a Withholding Certificate (Form 8288-B) before closing. If approved, the IRS reduces or eliminates the withholding requirement based on the seller’s estimated actual tax liability. This can significantly improve the seller’s cash flow at closing.
The application must be submitted to the IRS before or at closing. Processing typically takes 90 days or more, so early filing is critical. A qualified US tax professional — ideally one experienced with international clients — should handle this process.
FIRPTA and LLC or Trust Ownership
If you hold your Florida property through a US LLC or trust, FIRPTA treatment depends on the classification of the entity and its owners. A single-member LLC owned by a foreign national is generally treated as a disregarded entity — FIRPTA still applies. Proper structuring at the time of purchase can simplify the eventual sale process.
Filing a US Tax Return as a Foreign Seller
After closing, foreign sellers are required to file a US federal tax return (Form 1040-NR) to report the sale and calculate actual capital gains tax. Any amount withheld above the actual tax liability is refunded by the IRS — but only after the return is filed.
How We Help
Sea to Sky Realty works with tax professionals experienced in cross-border transactions to ensure our foreign seller clients understand their FIRPTA obligations before listing. We coordinate with your tax advisor and the closing agent to handle withholding correctly. Contact us at info@bradentonbroker.com.
Selling Your Florida Property?
We guide foreign sellers through every step — from FIRPTA planning to closing. Contact us before you list.