Selling US Property as a Non-Resident: FIRPTA Explained

If you’re a non-US resident selling real estate, or a timeshare in the United States, it’s important to understand your tax obligations under the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA is designed to ensure the IRS collects taxes owed on capital gains and rental income earned by foreign investors when they sell or transfer US property.

What is FIRPTA?

FIRPTA (Section 1445 of the U.S. Tax Code) requires that non-resident sellers of US real estate have a portion of the gross sale price withheld and submitted to the IRS at the time of sale.

This withholding acts as a prepayment of potential US taxes due on capital gains and other income related to the property.

Key Points to Know:

✅ Who is Responsible for FIRPTA Compliance?

• The buyer (referred to as the “transferee”)—not the seller—is legally responsible for ensuring FIRPTA withholding is correctly handled.
• The buyer’s settlement agent (usually the Title Company) manages the process during closing.

✅ How Much Is Withheld?

• 15% of the gross sales price is withheld for most individual foreign sellers.
  • Example: If the sale price is $300,000, the IRS requires $45,000 to be withheld.
• 10% withholding may apply when the seller is a foreign-owned LLC or LLP (Section 1446(f)).

✅ When and How is Withholding Submitted?

• The Title Company must submit the withheld amount to the IRS within 20 days of closing.
• The withholding is reported using IRS Forms 8288 and 8288-A.
• These funds are held by the IRS until it confirms that the seller’s tax obligations have been met by filing a US Tax Return.

Exceptions to FIRPTA Withholding

One common exemption:

• If the buyer intends to use the property as a primary residence and the purchase price is $300,000 or less, the FIRPTA withholding may be waived.

⚠️ Note: This exception does not apply automatically—documentation and certification must be provided and signed at closing.

What Buyers Should Do

If you’re purchasing property from a foreign seller:

• Verify the seller’s residency status early in the process.
• Review the HUD or settlement statement before closing. The FIRPTA withholding (typically 15%) should appear on the seller’s side of the statement.

Retain all documents—you may need them when you sell the property in the future to prove FIRPTA compliance was met at the time of purchase.

How We Can Help

Our team specializes in helping non-resident property owners:

• Understand their FIRPTA obligations
• File the necessary tax returns to claim a refund of excess withholding
• Assist buyers in confirming compliance during US property purchases

Selling your U.S. property?
Let us guide you through the FIRPTA process and help maximize your tax recovery.
Contact us today to get started.