What percentage does FIRPTA withhold from a sale?

The standard FIRPTA withholding rate is 15% of the gross sale price. A reduced 10% rate applies for properties sold at $1 million or less when the buyer will use it as a primary residence. For sales under $300,000 where the buyer will use the property as a primary residence, no withholding is required.

When do I file a U.S. tax return after selling as a foreign seller?

Foreign sellers must file a U.S. tax return (Form 1040-NR) for the tax year in which the sale occurs. The return reports the capital gain, reconciles the FIRPTA withholding against the actual tax liability, and claims any refund owed. The filing deadline is typically June 15 for non-resident filers.

Does FIRPTA apply if I sell at a loss?

The withholding still applies at closing regardless of whether the sale results in a gain or loss. However, if you sell at a loss, you can file a tax return to claim a full refund of the withheld amount since no capital gains tax is owed. A withholding certificate can also be used to reduce or eliminate the withholding at closing based on the expected loss.

Who is responsible for FIRPTA compliance — the buyer or seller?

The buyer is legally responsible for withholding and remitting the FIRPTA amount to the IRS. If the buyer fails to comply, they become liable for the tax, interest, and penalties. In practice, the closing attorney or title company manages the withholding process as part of the closing.

Miami Real Estate

FIRPTA Tax Explained for Foreign Sellers

Q: Can I reduce or eliminate the FIRPTA withholding?

Yes. You can apply for a withholding certificate (IRS Form 8288-B) before closing to reduce the withholding based on your anticipated gain rather than the gross sale price. This application takes approximately 90 days to process and should be filed well in advance of your expected closing date.

FIRPTA is the single most important tax consideration for foreign nationals selling real estate in the United States. This guide explains how FIRPTA works, what it costs, and how sellers can minimize its impact.

Javier G. RamirezReal Estate BrokerMarch 20269 min read

Quick Answer

Detailed explanation of FIRPTA withholding for foreign sellers of U.S. real estate — rates, exemptions, withholding certificates, and refund procedures.

Owners acting on this guidance move forward through our Miami property selling services.

What Is FIRPTA?

The Foreign Investment in Real Property Tax Act (FIRPTA) is a U.S. federal law enacted in 1980 that ensures foreign persons pay income tax on gains from the sale of U.S. real property interests. Before FIRPTA, foreign sellers could dispose of U.S. real estate without paying U.S. taxes on the gain, which created an unfair advantage over domestic sellers.

Under FIRPTA, the buyer (or the buyer's agent) must withhold a percentage of the gross sale price at closing and remit it to the IRS. This withholding functions as a prepayment of the seller's capital gains tax obligation. The seller then files a U.S. tax return to reconcile the withholding against their actual tax liability and claim any refund owed. The IRS provides detailed FIRPTA withholding guidelines including rate tables and exemption criteria. Foreign owners uncertain about their rights to sell should review our guide on whether foreigners can sell property in Florida.

For foreign sellers navigating the complete selling process, our guide on selling Miami property from abroad provides step-by-step coverage of remote closings, agent selection, and marketing strategy.

Tax documents and financial forms related to real estate on professional desk

FIRPTA Withholding Rates

The FIRPTA withholding rates are determined by the sale price and the buyer's intended use of the property:

15% of gross sale price: The standard withholding rate that applies to most transactions involving foreign sellers.
10% of gross sale price: Applies when the sale price is $1,000,000 or less and the buyer (or a family member) will use the property as a primary residence for at least 50% of the time during the first two 12-month periods after closing.
0% (no withholding): Applies when the sale price is $300,000 or less and the buyer will use the property as a primary residence under the same criteria above.

It is important to understand that the withholding is based on the gross sale price, not the capital gain. For example, on a $2,000,000 sale, the standard withholding would be $300,000 (15%), regardless of how much profit the seller actually realized. This is why the withholding certificate process is so valuable for sellers with modest gains.

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The Withholding Certificate Process

Foreign sellers can apply for a withholding certificate using IRS Form 8288-B to reduce or eliminate the withholding amount based on their anticipated gain rather than the gross sale price. This is particularly beneficial when the actual capital gain is significantly less than 15% of the sale price — for example, when a seller purchased the property at a price close to the current sale price or invested substantially in improvements.

The application requires detailed information including the purchase price, improvement costs, selling expenses, depreciation taken, and the anticipated sale price. The IRS typically processes withholding certificate applications within 90 days, so sellers should file well in advance of the expected closing date.

If the withholding certificate is not processed before closing, the full 15% withholding is deposited into escrow. Once the IRS approves the reduced withholding, the difference is released to the seller. Understanding how remote closings work in Florida is important for sellers who will not be physically present when the FIRPTA withholding is processed at the title company.

Filing Your U.S. Tax Return

After selling U.S. real property, foreign sellers must file a U.S. income tax return (Form 1040-NR) to report the capital gain and reconcile the FIRPTA withholding against their actual tax liability. The capital gain is calculated as the sale price minus the adjusted cost basis (purchase price plus capital improvements minus depreciation).

If the actual tax owed is less than the amount withheld, the seller claims a refund on the tax return. Refunds are typically processed within several months of filing. The filing deadline for non-resident individuals is June 15 of the year following the sale, with an extension available to October 15.

Planning Ahead: Minimizing FIRPTA Impact

The best strategy for managing FIRPTA is proactive planning that begins at the time of purchase. This includes maintaining detailed records of purchase costs and capital improvements, understanding the tax implications of ownership structure (individual vs. LLC vs. foreign corporation), consulting with a CPA experienced in international real estate taxation, and applying for a withholding certificate before closing to align the withholding with your actual tax liability.

Tax treaties between the U.S. and certain countries may affect the calculation of capital gains tax and the availability of credits. Sellers who are managing the entire transaction remotely should also review whether physical presence is required to sell property in Miami. Monitoring Miami real estate market conditions helps inform the optimal timing for a sale. Supreme Capital Real Estate Agents Miami works alongside international tax advisors to ensure our foreign sellers are properly prepared for FIRPTA compliance and tax optimization.