If you are a foreign national selling a home, condo, or investment property in Florida, the single biggest surprise at closing is usually FIRPTA. A large slice of your sale proceeds — often far more than you will actually owe in tax — gets held back and wired to the IRS before you see a dollar. Understanding how FIRPTA works, and planning for it before you list, is the difference between a clean closing and tens of thousands of dollars trapped with the federal government for a year or more.
What Is FIRPTA?
FIRPTA — the Foreign Investment in Real Property Tax Act, codified at IRC § 1445 (26 U.S.C. § 1445) — is a federal tax-collection mechanism. Because a foreign seller may have no other U.S. presence after a sale, Congress made the buyer responsible for withholding a portion of the purchase price and remitting it to the IRS as a deposit against the seller's U.S. tax on any gain. It is not a separate tax; it is prepaid withholding against the capital-gains tax a foreign seller owes on the sale.
FIRPTA Withholding Rates
The amount withheld depends on the sales price and whether the buyer will use the property as a residence:
| Sales Price | Buyer's Use | FIRPTA Withholding |
|---|---|---|
| $300,000 or less | Buyer will use as a residence | 0% (exempt) |
| $300,001 – $1,000,000 | Buyer will use as a residence | 10% of price |
| Over $1,000,000 | Any use | 15% of price |
| Any price | Not buyer-occupied (e.g. rental/investment) | 15% of price |
The "residence" exceptions require that the buyer (or a member of the buyer's family) has definite plans to reside at the property for at least half of the days it is used during each of the first two 12-month periods after the sale. The buyer must be willing to sign a statement to that effect; many investors and second-home buyers will not, which leaves the 15% rate in place.
Who Is a "Foreign Person" for FIRPTA?
FIRPTA applies when the seller is a foreign person — a nonresident alien individual, a foreign corporation, a foreign partnership, or a foreign trust or estate. It does not apply to U.S. citizens or "resident aliens" (green-card holders or those who meet the substantial-presence test). A seller who is not foreign avoids FIRPTA entirely by giving the buyer a signed non-foreign affidavit (certification of non-foreign status) under penalty of perjury. Getting that single document right is often all it takes to remove the issue.
The Buyer Is Legally on the Hook
A point that surprises many parties: the buyer is the withholding agent and is personally liable to the IRS for the FIRPTA tax, plus penalties and interest, if it is not withheld. This is why buyers and closing agents take FIRPTA seriously — a buyer who pays a foreign seller the full price without withholding can be pursued by the IRS for the missed amount years later. In a typical Florida closing, the title or settlement agent withholds the funds from the seller's proceeds and files the paperwork, but the legal duty originates with the buyer.
Filing and Deadlines
The withheld funds must be reported and remitted to the IRS on Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests), with Form 8288-A for the seller, generally within 20 days after closing. The seller receives a stamped copy of Form 8288-A as proof of the credit, which is then claimed on the seller's U.S. tax return.
How to Reduce or Recover the Withholding
Option 1 — Withholding certificate (Form 8288-B), before or at closing
The most efficient fix is to apply for a withholding certificate on Form 8288-B, which asks the IRS to reduce withholding to the seller's estimated actual tax on the gain. If filed by the date of the sale, the buyer can hold the withheld funds in escrow (rather than sending them to the IRS) until the IRS responds, which historically takes around 90 days. When granted, only the reduced amount goes to the IRS and the rest is released to the seller — months or a year sooner than waiting for a refund.
Option 2 — File a U.S. tax return after year-end
If no certificate is obtained, the full withholding goes to the IRS and the foreign seller recovers the excess by filing a U.S. nonresident return (Form 1040-NR for individuals, Form 1120-F for foreign corporations) for the year of sale, claiming the withholding as a credit and receiving a refund of the difference. This works, but the money is tied up until the return is filed and processed the following year.
The Florida Advantage
FIRPTA is purely federal. Because Florida has no state income tax, there is no separate Florida nonresident withholding layered on top — unlike states such as California or Maryland that impose their own. A foreign person selling Florida real estate deals with FIRPTA alone, which makes the Florida side of the transaction comparatively clean once the federal withholding is handled correctly.
Common FIRPTA Mistakes
- Assuming 15% is the final tax. It is a deposit on the gross price; the real tax is on the gain and is usually far lower.
- Waiting until the closing table to address it. A withholding certificate must be applied for by the closing date to keep funds in escrow — afterward you are stuck waiting for a refund.
- No ITIN in place. Without taxpayer ID numbers, neither the certificate nor the refund can be processed.
- A defective non-foreign affidavit. If the seller is actually a U.S. person, a correct affidavit removes FIRPTA — but an improper one leaves the buyer exposed.
- Forgetting entity and estate consequences. Selling through the wrong entity, or after the owner's death, changes both the FIRPTA mechanics and the U.S. estate-tax picture.
Frequently Asked Questions
Related Reading
- Can a Foreigner Buy Property in Florida? — ownership rights and Florida's SB 264 foreign-ownership law.
- Cross-Border Estate Planning for Florida Property — the $60,000 U.S. estate-tax trap for foreign owners.
- Foreign-Investor Holding Structures for Florida Real Estate — how titling affects FIRPTA and estate tax.
Selling — or Buying From — a Foreign Owner in Florida?
Truestead Law handles the Florida closing and the FIRPTA mechanics together: non-foreign affidavits, withholding certificates, ITIN coordination, and clean IRS remittance — so your proceeds aren't trapped longer than the law requires.
International & Cross-Border Practice →This article is for general informational purposes and does not constitute legal or tax advice. FIRPTA outcomes depend on your specific facts, residency, and entity structure, and tax rates and procedures change. Consult a licensed Florida attorney and a qualified tax professional regarding your situation. Arthur Simpson, Esq. is licensed to practice law in the State of Florida. Attorney advertising.