South Florida’s real estate market runs on international money, and that goes both ways. Alongside the well-known wave of foreign buyers, a steady number of condos, single-family homes, and investment properties get sold every year by owners who are not U.S. citizens or green card holders. If you’re one of them, there’s a federal withholding rule worth understanding well before you get to the closing table: FIRPTA.
What FIRPTA Actually Does
The Foreign Investment in Real Property Tax Act requires the buyer, not the seller, to withhold a percentage of the sales price at closing and send it to the IRS. It isn’t a tax itself; it’s a deposit against whatever capital gains tax the seller may ultimately owe. The rule applies whenever the seller is a “foreign person” — a nonresident alien, or a foreign corporation, partnership, trust, or estate that hasn’t elected to be treated as a domestic entity for tax purposes.
How Much Gets Withheld
The withholding rate depends on the sales price and how the buyer intends to use the property:
- Sales price of $300,000 or less, with the buyer signing an affidavit that they (or a family member) will use it as a personal residence: no withholding required.
- Sales price between $300,001 and $1,000,000, with that same residence-use affidavit: 10% withholding.
- Everything else — investment and rental properties regardless of price, or any sale over $1,000,000: 15% withholding.
A detail many sellers miss: withholding is calculated on the gross sales price, not the profit. On a property with a modest gain, or even a loss, that can still tie up a large chunk of cash with the IRS for months.
Getting the Withholding Reduced or Refunded
Sellers aren’t stuck waiting until the following year’s tax return to see that money again. A seller (or their accountant) can file IRS Form 8288-B before closing to request a withholding certificate based on the actual estimated tax liability, which can reduce what’s withheld at the closing table itself. The catch is timing: the IRS can take 90 days or longer to process it, so this needs to start well before a contract is signed, not during the final week of escrow.
What It Means at the Closing Table
In practice, the closing agent or title company handles the mechanics of Forms 8288 and 8288-B, but the earlier everyone involved knows a seller is a foreign person, the smoother the transaction goes. Buyers’ and sellers’ agents both benefit from flagging it at contract, not during the title company’s final review, since fixing it late can delay funding. Having represented both sides of cross-border transactions here in South Florida, our team builds this into the timeline from day one rather than treating it as a closing-day surprise.
FIRPTA involves federal tax law, and every seller’s situation differs depending on residency status, entity structure, and any applicable treaty elections. This post is general information, not tax or legal advice — foreign sellers should work with a CPA or attorney experienced in cross-border transactions before listing.
If you’re a non-U.S. citizen considering selling property in Florida, or a buyer whose purchase involves a foreign seller, Oscar Donado and the Ne Plus Ultra Real Estate team can help you plan the transaction and connect you with the right tax professionals. Contact us to get started.