1. What FIRPTA is
The Foreign Investment in Real Property Tax Act makes sure foreign sellers pay US tax on gains from US real estate. Instead of chasing the seller later, the law makes the buyer the withholding agent: at closing, the buyer (in practice, the closing agent) withholds a percentage of the amount realized — usually the sale price — and sends it to the IRS.
FIRPTA applies when the seller is a “foreign person”: a nonresident alien individual, a foreign corporation, partnership, trust or estate. A US citizen or green-card holder living abroad is generally not a foreign person for FIRPTA.
2. How much is withheld: 15%, 10% or 0%
The standard rate is 15% of the amount realized. It drops to 10% if the price is $1,000,000 or less and the buyer acquires the property to use as a residence, and to 0% if the price is $300,000 or less and the buyer will use it as a residence (the buyer must have definite plans to live there at least 50% of the days it is used in each of the first two years).
Important: withholding is not the tax itself. It is a prepayment calculated on the price, not on your profit — so it is often far more than the tax you actually owe.
3. Forms and deadlines
The buyer files Form 8288 and Form 8288-A and pays the withheld amount to the IRS within 20 days after the closing. The IRS stamps a copy of 8288-A for the seller — keep it, you'll need it for your refund.
Before closing, the seller can apply for a withholding certificate on Form 8288-B to reduce withholding to the expected actual tax. If the application is pending at closing, the closing agent typically holds the funds in escrow until the IRS responds. Start early: processing takes time.
4. Getting the excess back
After the year of sale, the seller files a US income tax return — Form 1040-NR for individuals — reporting the gain and claiming the FIRPTA withholding as a credit. If the withholding exceeds the tax, the IRS refunds the difference. You will need a US taxpayer identification number (ITIN) to file.
Florida has no state income tax, so there is no additional state tax on the gain. If the property was rented, depreciation recapture may apply.
5. Worked example
A nonresident sells a condo for $800,000. They bought it for $600,000, spent $50,000 on improvements and pay $50,000 in selling costs. The gain is about $100,000.
FIRPTA withholding at 15% is $120,000 (or $80,000 at 10% if the buyer will live there). If the long-term capital gains tax on $100,000 comes to roughly $15,000–20,000, the seller can expect a refund of about $100,000 after filing — or reduce the withholding upfront with Form 8288-B. Figures are illustrative; your CPA will compute the actual tax.
6. Practical tips
Plan the sale with a CPA experienced with nonresidents months ahead; decide early whether to file 8288-B; keep records of purchase price, improvements and closing statements; and if you own through a foreign corporation, the rules and tax rates differ. Try the seller calculator to estimate withholding and a possible refund.
This guide is general information, not legal or tax advice. Laws and programs change — confirm details with a Florida attorney and a US tax professional.
