FIRPTA
Key Facts Every Foreign Seller Should Know About FIRPTA
FIRPTA Withholding Services for Non-U.S. Property Sellers
Selling U.S. real estate as a foreign national comes with specific tax obligations — and one of the most important is complying with the Foreign Investment in Real Property Tax Act (FIRPTA). If you are a non-U.S. resident selling property in Florida or anywhere in the United States, you are required to meet FIRPTA withholding requirements to avoid penalties and interest.
At LBEA, we specialize in FIRPTA tax services for individuals, corporations, and international investors. We make the process straightforward, handle all the IRS paperwork, and ensure your transaction is compliant from start to finish.
FIRPTACOMPLIANCE
Stay fully compliant with the Foreign Investment in Real Property Tax Act (FIRPTA) when selling U.S. property as a non-resident. Our team ensures all IRS requirements are met, withholding is correctly calculated, and every necessary form is submitted on time. We guide you through the process from property sale to final tax filing, reducing your risk of penalties and delays.
FIRPTA EXEMPTION
Under the Foreign Investment in Real Property Tax Act (FIRPTA), most non-U.S. residents selling U.S. real estate are subject to a withholding of 15% of the gross sales price. This amount is sent directly to the IRS as a prepayment of potential capital gains tax. However, certain transactions may qualify for a FIRPTA exemption or reduced withholding. A foreign property seller is not required to have tax withheld on the sale because they meet specific IRS criteria. However, under these circumstance, you are still required to report the sale by filing a US Fed Tax Return.
FIRPTA REMITTANCE
The buyer must send 15% (for individual sellers) or 21% (for corporations) of the amount realized on the sale — to the IRS. This payment must be remitted within 20 days of the closing date using Forms 8288 and 8288-A. Next Step: The seller must file a U.S. Federal Tax Return the following year to calculate their actual tax liability and claim any refund if the FIRPTA withholding exceeds the amount owed.
WITHHOLDING CERTIFICATE
If you qualify for a reduced FIRPTA withholding, the buyer’s required withholding amount is held in escrow by the closing agent until the IRS responds to your application. This process typically takes 90 to 120 days. Your application for reduced withholding must be filed no later than the closing date. The following year, you will file your U.S. Federal Tax Return to determine your final tax liability and claim any excess withholding as a refund.
FIRPTA SERVICES
We offer a full line of FIRPTA services at affordable prices. Our FIRPTA advisors will ensure that your transactions will be completed in a timely manner and that you don’t have to pay unnecessary taxes, penalties or interests. Our services cater to clients from the USA, Canada, England, and France, as well as those with business or personal ties to these countries and more.
Application for an ITIN (Individual Tax Identification Number)
A tax processing number issued by the IRS to register and identify the seller’s withholding amount when filing U.S. Tax.
Processing for U.S. Withholding from Foreign Persons
FIRPTA requires Forms 8288 and 8288-A when transactions occur with Foreign Persons involving dispositions of U.S. real property interest. It is crucial to have a FIRPTA Tax Advisor to fill these forms properly to avoid paying penalties and interest charges from the IRS.
Application for a Withholding Certificate
Form 8288-B – The IRS can Issue a Withholding Certificate to reduce or eliminate withholding on dispositions of U.S real property interest from a Foreign Person.
FIRPTA for Realtors, Title Agents and Attorneys
The Help You Need to Keep Transactions Moving Forward
Why Should Every Realtor, Title Agent, and Attorney Partner with an Expert in FIRPTA Real Estate Transactions?
Protect Your Clients’ Interest and Your Reputation
FIRPTA rules are complex, and most real estate professionals are not tax experts. Partnering with an experienced FIRPTA consultant ensures the correct withholding percentage is applied, the proper IRS forms (such as Forms 8288, 8288-A, and 8288-B) are filed on time, and clients avoid unnecessary withholding or delays in receiving funds. This level of precision builds client trust and protects your professional reputation.
Avoid Costly Closing Delays
Incorrect FIRPTA handling can delay closings by weeks or even months. A FIRPTA expert coordinates directly with buyers, sellers, title companies, and the IRS to ensure withholding certificates, remittances, and exemptions are processed correctly. This proactive approach keeps deals moving forward and prevents last-minute surprises.
Reduce Liability and Risk
For Realtors, title agents, and attorneys, FIRPTA mistakes can create legal and financial liability. Partnering with a specialist transfers that risk to an expert who understands both real estate transactions and U.S. tax compliance for non-residents. This not only protects your business but also gives clients confidence that their transaction is in capable hands.
Streamline Communication and Coordination
A FIRPTA specialist acts as a single point of contact for all FIRPTA-related tasks, eliminating confusion between the buyer, seller, and various closing parties. This improves efficiency, reduces stress, and ensures all documentation is accurate and complete.
Enhance Your Service Offering
When you can confidently tell foreign sellers, “We have a FIRPTA expert on our team,” you set yourself apart from competitors. This added value can be the deciding factor for international clients choosing a Realtor, Title company, or Attorney.
Faster, Smoother Closings
The FIRPTA process often involves multiple parties — buyers, sellers, title companies, and the IRS. Without expert guidance, communication gaps can delay closings by months. A FIRPTA specialist streamlines the process, handles the paperwork, and works directly with all parties to keep transactions on track.
NO WITHHOLDING
If the buyer intends to use the property as his residence and the selling price is $300,000 or less then there will be no withholding. Even if there is no FIRPTA WITHHOLDING, you are still required to report the sale.
Frequently Asked Questions
We’ve gathered the answers to the questions we’re most often asked about FIRPTA, so you can better understand the process and what it means for your transaction.
A withholding agent, any person having the control, receipt, custody, disposal or payment of income that is subject to withholding. Generally, the person who pays an amount to the foreign person subject to withholding must do FIRPTA withholding. The withholding agent can be liable for the full amount of FIRPTA withholding tax required to be withheld, plus penalties and interest, beginning on the 21st day after the date of transfer.
- The IRS requires tax filers to have a ITIN or a US Social Security Number to process your returns.
- We can apply for an ITIN if you are a foreign person and have not been assigned a tax identification number by the IRS or a US Social Security Number.
Option A – If the sales price is less than $300,000 and the buyer signs an affidavit, the seller can eliminate the withholding. The affidavit must state that the buyer must reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer.
Option B – The amount the transferor realizes on the sale of a U.S. real property interest is zero or less than the required withholding at 15%. An example in real estate, a seller has a sales contract for $400,000 with only $100,000 gain on the sale, taxable at a maximum capital tax gain of 20%. FIRPTA requires the buyer to withhold $60,000. Applying for a reduced withholding can lower the amount from $60,000 to $20,000 because the tax liability is less than the amount required to be withheld at 15% of the sale price.
We often work alongside with other professionals to best meet your needs. We will work with your sales professionals to process the FIRPTA documents.
The IRS will generally act on the applications within 90 days of a complete application. A complete application includes processing of a Taxpayer Identification Number of everyone involved the transaction.
FIRPTA does not automatically exempt the seller when taking a loss on their Real Property Interest. An application for a withholding certificate with the assistance of a FIRPTA Tax Advisor may reduce the seller’s withholding with the IRS Form 8288-B. The application for withholding certificate must be done before or on the closing date.
Here’s an example: In 2007 a foreign person purchased a Real Estate Property for $350,000. The foreign person sold his Real Estate Property in 2018 for $320,000. The seller recognized a loss of $30,000 from the sale of the Real Estate Property. FIRPTA does not automatically exempt the seller from withholding on the loss of $30,000. At this point, the seller has two options: apply to reduce withholding or pay 15% of the sales price and claim the amount withheld on U.S Tax Return.
The seller has until the closing date to apply for a withholding certificate to lower or eliminate the withholding
This is a straightforward process once you have received a withholding statement from the IRS. Our Services extend to provide filing of U.S Income Tax Returns for Non-Residents, here we can file your return to claim the withholding less your tax liability.
Contact our FIRPTA Experts
Your FIRPTA Partner from Sale to IRS Compliance!
