FIRPTA Withholding in 2026: What Every Foreign Seller Must Know Before Closing

Selling US real estate as a foreign owner can create an unexpected cash-flow issue at closing: FIRPTA withholding.

The Foreign Investment in Real Property Tax Act, commonly known as FIRPTA, was enacted in 1980. Under Internal Revenue Code Section 1445, gains from the sale of US real property by a foreign person may be subject to US tax.

For the seller, however, the most important point is often misunderstood: the buyer is generally responsible for withholding and remitting the funds, but the amount withheld comes directly from the seller’s proceeds.

That distinction can affect liquidity, closing preparation, tax planning, and the timing of a future refund.

Who is responsible for FIRPTA withholding?

The buyer, or another designated withholding agent, generally has the legal obligation to determine whether FIRPTA applies, withhold the required amount, and submit it to the IRS.

The seller does not normally hand the withholding payment directly to the IRS at closing. Nevertheless, the seller experiences the financial impact because the amount is retained from the sale proceeds.

The standard withholding rate is generally 15% of the amount realized, which usually means the gross sales price plus certain liabilities assumed by the buyer. It is not calculated only on the seller’s profit.

This is why FIRPTA can create friction even where the seller:

• Is selling at a small gain
• Is breaking even
• Is selling at a loss
• Has substantial deductible expenses
• Expects a lower final US tax liability

A seller may therefore have significant funds held even though the eventual tax due is considerably lower.

FIRPTA is based on the gross sale amount, not the gain

FIRPTA withholding is generally calculated on the gross amount realized rather than the seller’s net profit.

For example, a foreign owner selling a property for $2 million may face withholding based on approximately $2 million, even if the seller’s adjusted basis, selling costs, depreciation, or other deductions substantially reduce the taxable gain.

The residence exceptions can reduce or eliminate withholding in certain circumstances:

• If the amount realized is $300,000 or less and the buyer intends to use the property as a residence, the withholding rate may be 0%.
• If the amount realized is more than $300,000 but does not exceed $1 million, and the buyer will use the property as a residence, a 10% rate may apply.
• In other situations, the standard 15% rate generally applies.

These rules depend on the buyer’s intended use, the transaction value, and the specific facts. The buyer must be comfortable relying on the applicable exception, which is one reason title and escrow professionals may request detailed certifications before closing.

The IRS FIRPTA guidance provides the current framework, but sellers should obtain advice specific to their ownership structure and transaction.

The 20-day reporting and deposit deadline

The buyer generally must report and deposit the withheld amount with the IRS within 20 days after the transfer.

The principal forms are:

• Form 8288, used by the withholding agent to report and remit the tax
• Form 8288-A, which documents the amount withheld for the foreign seller
• Form 8288-B, used to request a withholding certificate that may reduce or eliminate the withholding

The 20-day deadline is technically the buyer’s responsibility, but it remains important to the seller. Missing documents, unclear foreign-person status, or an incomplete withholding certificate application can create delays in the release or processing of funds.

A seller should coordinate with the buyer’s title or escrow team well before closing to confirm:

• Who is acting as withholding agent
• How the withheld funds will be handled
• Whether a withholding certificate application is pending
• Which forms will be provided after closing
• How the seller will receive Form 8288-A for the eventual tax return

Can a foreign seller reduce or eliminate FIRPTA withholding?

A foreign seller may request a reduction or elimination of withholding by filing Form 8288-B, Application for Withholding Certificate.

A withholding certificate may be appropriate when the seller expects the actual US tax liability to be lower than the statutory withholding amount. It may also be relevant where a nonrecognition provision, such as a properly structured exchange, could affect the tax treatment.

The IRS may review:

• The expected sales price
• The seller’s adjusted basis
• Capital improvements
• Depreciation
• Selling expenses
• Existing tax attributes
• Ownership structure
• The anticipated US tax liability
• Any applicable exemption or nonrecognition provision

Processing often takes approximately 90 days, although timing can vary. Expedited handling may be possible in qualifying hardship circumstances.

The timing is critical. To preserve the specific procedural protections associated with a pending application, Form 8288-B generally needs to be prepared and filed before, or no later than, the transfer date. A post-closing filing may not prevent the buyer from having to remit the withholding within the ordinary 20-day period.

For that reason, a withholding certificate is a pre-closing planning matter, not a document to consider after the transaction has already closed. Sellers should work with a qualified US CPA or tax attorney early enough to assemble the required documentation and obtain a taxpayer identification number if necessary.

Withholding is not the final tax

FIRPTA withholding is generally a prepayment of tax rather than the final calculation.

After the sale, the foreign seller may need to file a US nonresident income tax return, generally Form 1040-NR, to report the transaction and reconcile the amount withheld with the seller’s actual tax liability.

The final analysis may involve:

• US federal capital gains treatment
• Depreciation recapture
• The net investment income tax, where applicable
• Entity-level taxation
• State and local transaction considerations
• Tax treaty provisions
• Foreign tax credits
• The seller’s home-country tax position

Florida does not impose a general individual state income tax, but Florida transaction costs, documentary taxes, entity-level considerations, and the seller’s broader tax position may still require review. Sellers located in other states may face additional state withholding or income-tax rules.

If the withholding exceeds the final liability, the seller may claim a refund through the relevant US tax filing. Refund timing can extend for many months, depending on filing completeness, IRS processing, identification requirements, and the complexity of the transaction.

The hidden trap: selling an entity instead of the property

FIRPTA is not limited to a direct sale of a deeded property.

A sale of shares, membership interests, or other interests in a US real property holding corporation or similar entity may also create FIRPTA exposure when the entity’s value is principally connected to US real property.

This issue can affect offshore companies, family investment vehicles, partnerships, and other structures established years earlier for asset protection, estate planning, or investment management.

Before listing, the seller should determine:

• Who legally owns the property
• Whether the ownership vehicle is treated as fiscally transparent
• Whether the entity may qualify as a US real property holding corporation
• Whether an interest sale or asset sale is contemplated
• Whether prior reorganizations changed the tax analysis
• Which party is responsible for providing ownership certifications

An entity sale can involve different documentation and tax consequences from a direct property sale. Early professional review is essential.

A practical FIRPTA playbook before listing

Foreign owners considering a sale should address the following items before accepting an offer:

1. Confirm foreign-person status. Determine whether the seller is a foreign individual, corporation, partnership, trust, or other entity for FIRPTA purposes.
2. Review certification requirements. If the seller is not foreign, a valid non-foreign affidavit may allow the buyer to avoid FIRPTA withholding. The certification is generally made under penalty of perjury. An incorrect affidavit can expose the buyer to liability, so buyers and title companies may review it carefully.
3. Engage a US CPA early. Ideally, tax planning begins before the property is listed.
4. Model tax and withholding separately. Estimate the eventual tax liability alongside the gross withholding amount.
5. Evaluate Form 8288-B. Determine whether a withholding certificate could preserve more sale proceeds at closing.
6. Review exchange options. If a 1031 exchange or another nonrecognition strategy may be relevant, obtain specialist advice before signing a contract.
7. Review the ownership structure. Do not assume that an offshore holding entity avoids FIRPTA.
8. Coordinate with title and escrow. Confirm the deposit mechanics, forms, deadlines, and document flow well in advance.

Why FIRPTA matters in the 2026 luxury market

FIRPTA planning is particularly consequential in the current market. Recent reporting indicates that Miami-Dade’s $10 million-plus segment is moving at a record-setting pace, while international buyers remain a significant force in high-end and new-construction demand.

For a foreign owner who acquired US luxury real estate earlier in the cycle, a sale today may produce a substantial gain, and a substantial temporary withholding amount. Strong demand can support an attractive sale price, but it can also increase the cash-flow impact of a 15% gross withholding calculation.

This makes FIRPTA part of the broader strategy for international real estate investment, not simply an administrative formality.

Biguine Investment Group helps international owners navigate the real estate side of a confidential sale, private placement, or custom search. With 20 years of market expertise, full brokerage licensing, a network spanning more than 100 countries, and end-to-end transaction coordination, our team can help connect sellers with qualified tax and legal professionals while managing the real estate process.

Contact Biguine Investment Group to discuss your objectives.

Frequently asked questions

Who is responsible for FIRPTA withholding?

The buyer or designated withholding agent is generally responsible for withholding the required amount, filing Form 8288, and remitting the funds to the IRS. The seller bears the economic impact because the amount is deducted from the sale proceeds.

Is FIRPTA calculated on the sale price or the gain?

FIRPTA withholding is generally calculated on the gross amount realized, not only on the seller’s net gain. The final tax is determined later through the seller’s US tax filing, where basis, expenses, depreciation, and other factors may be considered.

Can a foreign seller reduce or avoid FIRPTA withholding?

Potentially. Certain residence exceptions may apply, and a seller may request a withholding certificate through Form 8288-B. The seller may also have tax planning options involving a qualifying exchange or another nonrecognition provision. Professional advice is required.

How long does it take to receive excess FIRPTA withholding back?

A refund is generally requested through the seller’s US nonresident tax return. Processing can take many months, depending on the filing, supporting documents, taxpayer identification requirements, and the complexity of the transaction.

Does FIRPTA apply when selling shares of an entity that owns US property?

It can. FIRPTA may apply to interests in certain US real property holding corporations or entities whose value is principally connected to US real property. The ownership structure should be reviewed before listing or negotiating the sale.

FIRPTA is a planning problem, not a closing-day problem. Early coordination can help a foreign seller understand the expected withholding, prepare the correct documentation, and avoid unnecessary delays in receiving sale proceeds.

This article is provided for general educational purposes only and does not constitute tax, legal, accounting, or investment advice. Biguine Investment Group is a real estate brokerage and investment coordination firm, not a tax or law firm. Sellers should consult qualified US and home-country tax and legal professionals regarding their specific circumstances.