FIRPTA Withholding Calculator

What is FIRPTA withholding?

The Foreign Investment in Real Property Tax Act (FIRPTA) requires the buyer to withhold federal tax when the seller is a foreign person. The default rate is 15% of the amount realized. It drops to 10% when the buyer will use the property as a primary residence and the price is between $300,000 and $1,000,000, and to 0% at or below $300,000 with a qualifying primary-residence use.

FIRPTA is nuanced and the IRS rules control. Atlantic Title Firm coordinates FIRPTA withholding and documentation at closing — always confirm specifics with your CPA or attorney.

The three withholding rates, and how the property will be used

FIRPTA withholding is not a flat 15% in every case. The rate turns on the amount realized and on whether the buyer intends to use the property as a residence, which is a point many estimates miss.

If the amount realized is $300,000 or less and the buyer will use the property as a residence, withholding is 0%. If it is over $300,000 but not more than $1,000,000 and the buyer will use it as a residence, the rate is 10%. In every other case — including any purchase where the buyer will not occupy the property, such as a rental or investment purchase — the rate is 15%.

The residence exception depends on the buyer's intent, and the buyer signs to it. An investor buying the identical condo pays the higher rate on the identical price.

The buyer is the withholding agent, and that is the real risk

FIRPTA places the obligation on the buyer, not the seller. If withholding should have occurred and did not, the IRS can pursue the buyer for the tax, plus interest and penalties — even years later, and even though the money went to the seller at closing.

That is why a Florida closing on a foreign seller collects a signed non-foreign certification from the seller when FIRPTA does not apply. It is the buyer's documentation that withholding was not required. Without it, the buyer is exposed.

Withheld funds are reported and remitted on IRS Forms 8288 and 8288-A, which are generally due within 20 days of the closing date.

Reducing the withholding when it exceeds the actual tax

FIRPTA withholds on the gross amount realized, not on the seller's gain. A foreign seller who bought at a high price and is selling for less can easily have withholding that far exceeds any tax actually owed — sometimes on a transaction where there is no gain at all.

The remedy is a withholding certificate, applied for on IRS Form 8288-B. If the application is filed on or before the closing date, the withheld funds can be held in escrow rather than remitted while the IRS considers it. Approval commonly takes several months, so this needs to start well before closing, not at the table.

This calculator estimates the withholding. It is not tax advice, and a foreign seller should have their own CPA or tax attorney involved early.

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