FIRPTA withholding when a foreign seller sells Florida property

Who withholds under FIRPTA, and on what amount?

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) lets the United States tax foreign persons when they dispose of US real property interests, and it collects part of that tax at closing through withholding.

The obligation sits with the buyer. In most cases the buyer (the transferee) is the withholding agent, and the IRS also lists certain purchasers' agents and settlement officers among those required to withhold. In a Florida closing, the mechanics usually run through the closing agent or title company, but the buyer stays responsible: if the seller is foreign and nothing is withheld, the buyer may be held liable for the tax.

That is why closing agents ask every seller about status. A seller who is not a foreign person can sign a certification of non-foreign status, which can be a valid Form W-9.

Withholding is calculated on the amount realized, not on the profit. The amount realized is the sum of:

• the cash paid or to be paid (principal only);
• the fair market value of other property transferred; and
• any liability the buyer assumes or that the property is subject to immediately before and after the transfer.

When a foreign person owns the property with others, the amount realized is allocated by capital contribution, and spouses are treated as having contributed 50% each. The buyer withholds on the share allocated to the foreign owners.

15%, 10% or zero: the residence thresholds

The general rate is 15% of the amount realized (10% for dispositions before February 17, 2016). Lower rates apply only when the buyer acquires the property to use as a residence:

Three details trip people up:

• The buyer's use counts, not the seller's. The buyer or a family member must have definite plans to reside there at least 50% of the days it is used by anyone during each of the first two 12-month periods after the transfer, not counting vacant days.
• The full exemption needs an individual buyer. The $300,000 exception does not apply if the actual buyer is not an individual, even if the property is acquired for one.
• The threshold looks at the total. If co-owners sell a home for more than $300,000, the exemption does not apply just because each owner's share is below $300,000.

If the buyer relies on the residence exception and then does not live there as planned, the IRS can collect the tax from the buyer, unless the change came from circumstances that could not reasonably have been anticipated. See exceptions from FIRPTA withholding.

Forms 8288, 8288-A and 8288-B: what each one does

• Form 8288 reports and pays the withheld tax. The buyer files it and sends the money by the 20th day after the date of transfer.
• Form 8288-A is prepared for each foreign seller and filed with Form 8288. The IRS stamps Copy B and mails it to the seller, who attaches it to their US income tax return to get credit for the tax withheld.
• Form 8288-B is the application for a withholding certificate, which can reduce or eliminate the withholding. The buyer or the seller can file it.

A withholding certificate may be issued when the regular withholding would exceed the seller's maximum tax liability, when the gain is exempt or covered by a nonrecognition provision, or when there is an agreement with the IRS for payment of the tax. The IRS generally acts within 90 days after receiving a complete application, including the taxpayer identification numbers of all parties.

Timing is the key point. If a Form 8288-B application is submitted on or before the closing date and is still pending, the buyer must still withhold the full amount, but does not have to send it to the IRS until the 20th day after the IRS mails the certificate or the notice of denial. The seller must notify the buyer in writing that the certificate has been applied for, on the day of the transfer or the day before. If the main purpose is to delay payment, interest and penalties run from the 21st day after the transfer.

The Form 8288 instructions add that the home sale exclusion under section 121, and like-kind exchanges that do not fully qualify or are not completed in time, require a certificate rather than a simple notice.

The ITIN: why the seller needs one and when to apply

The IRS requires the taxpayer identification numbers of the buyer and the foreign seller on Forms 8288, 8288-A and 8288-B. A foreign seller who is not eligible for a Social Security number needs an ITIN, requested on Form W-7 under Exception 4, which covers dispositions of US real property interests.

• Not before the contract. Without another valid reason, a foreign seller cannot get an ITIN before there is a legally binding contract for the sale. Once the contract exists, the seller can apply.
• Together with the certificate. A seller who wants a withholding certificate and has no TIN can attach Form 8288-B to Form W-7 and send both to the IRS ITIN Operation in Austin. If the ITIN is rejected, the Form 8288-B is not processed.

If the forms reach the IRS without the seller's TIN, the IRS processes them but does not stamp and mail Copy B of Form 8288-A; it sends Letter 3794 asking the seller to apply for an ITIN. See the IRS ITIN guidance for foreign property buyers and sellers.

The tax return is where the real tax is settled

FIRPTA withholding is a prepayment, not the final tax. A foreign individual seller still files a US income tax return, generally Form 1040-NR, for the year of the sale. The return reports the gain, computes the actual tax and claims the amount on Form 8288-A as a credit. If the withholding exceeded the tax, the difference is refunded; if it fell short, the seller pays the balance.

From the Form 1040-NR instructions for tax year 2025:

• Tax withheld under section 1445 and shown on Form 8288-A goes on line 25f, with a copy of each Form 8288-A attached to the front of the return.
• A nonresident who did not receive US wages subject to withholding files by the 15th day of the 6th month after the tax year ends. For calendar year 2025, that was June 15, 2026.
• Refunds of tax withheld on Form 8288-A may take up to 6 months to be issued.

The sale is reported in the year it actually happened, even when a withholding certificate changes the date shown on Form 8288-A. And the IRS notes that a nonresident who meets the eligibility test may be able to use the home sale exclusion under section 121, up to $250,000 on Form 1040-NR. That is one of the reasons sellers request withholding certificates.

A practical timeline for a Florida closing

1. Before listing: confirm whether you are a foreign person for FIRPTA purposes and gather the purchase and improvement records that support your cost basis.
2. Once the contract is signed: apply for an ITIN if you do not have one, and review with your CPA whether a Form 8288-B application makes sense given the expected gain.
3. On or before closing day: if you applied for a withholding certificate, notify the buyer in writing, and tell the closing agent early so the settlement statement reflects it.
4. At closing: the withholding comes out of the proceeds, and the closing agent generally reports the sale on Form 1099-S. Florida's documentary stamp tax on the deed is a separate state charge: 70 cents per $100 of consideration in every county except Miami-Dade, which has its own rate, according to the Florida Department of Revenue.
5. Within 20 days: Form 8288 and Form 8288-A are filed and the tax is paid, unless a certificate application is pending.
6. The following year: file Form 1040-NR with Copy B of Form 8288-A, and allow time for any refund.

Every sale has its own facts, so treat this as a general map, not a checklist for a specific transaction.

Frequently asked questions

Sources

General information, not tax, legal or immigration advice for your situation. Figures and dates were checked on official sources on the date shown and can change; a licensed CPA has not yet reviewed this draft. MTroncone CPA is not affiliated with the IRS or any government agency.