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If you are not a U.S. person and you sell Florida real estate, federal law generally requires 15 percent of the gross sales price to be withheld at closing and sent to the IRS. Note the words gross sales price. Not your profit. Not your net proceeds after the mortgage payoff. The full amount realized on the sale.
That is why a foreign seller can close on a Miami condo, walk away with far less than expected, and only then discover that most of the shortfall is a deposit against a tax bill that may turn out to be much smaller. FIRPTA is not a tax. It is a prepayment mechanism. Managed early, it can often be reduced or avoided entirely. Managed late, it becomes a refund you wait a year for.
FIRPTA, the Foreign Investment in Real Property Tax Act, applies when a foreign person disposes of a U.S. real property interest. A foreign person includes a nonresident alien individual, a foreign corporation, a foreign partnership, and a foreign trust or estate.
Two points that surprise people in Miami. First, holding the property through a U.S. limited liability company does not automatically solve the problem, because a single-member LLC is generally disregarded and the IRS looks through to the owner. Second, the default assumption runs against the seller: a buyer who cannot establish that the seller is a U.S. person is expected to withhold. That is why the certification of non-foreign status, often called a FIRPTA affidavit, appears in South Florida closing packages routinely, including for sellers who are U.S. persons.
The default withholding rate is 15 percent of the amount realized. Two narrower outcomes exist, and both depend on what the buyer intends to do with the property, not on anything the seller does.
$300,000 or less
Rate: 0 percent
Condition: Buyer is an individual acquiring it as a residence and meets the use test below.
Over $300,000 up to $1,000,000
Rate: 10 percent
Condition: Same residence and use test.
Over $1,000,000
Rate: 15 percent
Condition: Standard rate; no residence exception available.
Any amount, no qualifying buyer use
Rate: 15 percent
Condition: The default in most investment and rental sales.
The use test is stricter than most listings suggest. The buyer, or a member of the buyer's family, must have definite plans to reside at the property for at least 50 percent of the number of days the property is used by any person during each of the first two 12-month periods after the transfer. Days the property sits vacant do not count. The buyer must be an individual, not an entity.
So the exception is not automatic below $300,000, and a $290,000 sale to an investor who plans to rent it out gets no relief at all. This is the single most commonly misstated point in Miami real estate content.
In most transactions the buyer is the withholding agent and is personally liable for the tax if it is not withheld. That liability is why buyers, their lenders, and the title company all take FIRPTA seriously even though the money is economically the seller's.
In practice, in a typical South Florida closing, the title or closing agent holds the withheld funds and handles the remittance. But the withholding agent must file Form 8288 and transmit the tax by the 20th day after the date of transfer. Form 8288-A accompanies it, one for each person subject to withholding. The IRS stamps Copy B and mails it to the seller, and that stamped copy is the seller's proof of the credit.
If your actual tax liability will be less than the amount to be withheld, which is very often the case, you can apply for a withholding certificate on Form 8288-B to reduce or eliminate the withholding.
Here is the timing that decides everything: the application must be filed on or before the date of transfer, and the IRS commonly takes around 90 days to act on it. A seller who first hears the word FIRPTA at the closing table has already lost this option. A seller who raises it when the contract is signed usually still has it.
If an application is pending on the closing date, the tax does not have to be paid immediately, but it must still be reported and paid within 20 days after the IRS mails the certificate or a denial. The funds typically sit in escrow in the meantime.
Selling a Miami property as a foreign national?
Talk to us when the contract is signed, not at closing. Levine CPA and Advisors handles FIRPTA withholding certificates, ITIN applications, and the return that gets your money back. Call (305) 912-0085 or schedule a FIRPTA consultation.
A foreign seller generally needs a U.S. taxpayer identification number. Without one on Form 8288-A, the IRS will not mail the stamped Copy B, and the seller has to substantiate the withholding a harder way when claiming the credit.
The catch is sequencing. A foreign person generally cannot obtain an ITIN for this purpose before there is a sale under contract. As soon as there is a legally binding contract to dispose of the property, the seller becomes eligible to request one on Form W-7, which can be submitted together with the Form 8288-B application.
So the window opens at contract signing and the work has to happen inside it. That single constraint drives the entire FIRPTA calendar.
Contract signed: FIRPTA status identified; ITIN eligibility begins. — Day 0
Form W-7 and Form 8288-B prepared: Gain computed; application assembled. — Within days of contract
Form 8288-B filed: Must be filed on or before the transfer date. — Before closing
Closing: Funds withheld or escrowed pending the certificate. — Contract date
Form 8288 and Form 8288-A filed: Withholding agent remits the withheld amount. — By day 20 after transfer
IRS acts on the certificate: Reduced amount released, or denial issued. — Commonly around 90 days
Form 1040-NR filed: Actual tax computed; credit claimed; refund requested. — Following filing season
Read that last row carefully. If you sell in March and take no action, you generally cannot claim the refund until you file the return for that year, which means waiting into the following year and then waiting again for processing. Filing Form 8288-B before closing is what compresses a wait of more than a year into a few months.
If the sale has closed and 15 percent is already with the IRS, the certificate route is gone but your money is not. You claim the withholding as a credit on a U.S. income tax return for the year of the sale, typically Form 1040-NR for an individual, and request the difference back.
To do that you need the stamped Form 8288-A Copy B, a taxpayer identification number, and a defensible computation of your actual gain, including your basis, capital improvements, and selling costs. Sellers who kept renovation records are usually pleased they did. Refunds in this posture commonly take several months after filing.
FIRPTA punishes late awareness and rewards early planning, and almost nothing else about it is discretionary. If you are a foreign owner of Florida property, the moment to get advice is when you decide to sell, ideally before the contract, and at the very latest the week it is signed.
If you are also weighing whether to become a Florida resident, that is a separate analysis with its own rules, and our guide to establishing Florida residency for tax purposes covers it. For cross-border filings generally, see our international tax services.
The standard rate is 15 percent of the gross amount realized, not of your profit. A reduced 10 percent rate applies when the amount realized is over $300,000 and up to $1,000,000 and the buyer is an individual who meets the residence use test, and no withholding is required at $300,000 or less under that same test.
Yes. Withholding is based on the gross sales price, so it applies even when you have little or no gain. That is exactly the situation Form 8288-B is designed for, since it lets you apply before closing to reduce the withholding to your actual expected liability.
The buyer is generally the withholding agent and is personally liable if the tax is not withheld and remitted. In practice the title or closing agent handles the mechanics, and Form 8288 with Form 8288-A is due by the 20th day after the transfer.
No withholding is required when the amount realized is $300,000 or less and the buyer is an individual who has definite plans to reside at the property for at least 50 percent of the days it is used by anyone during each of the first two 12-month periods after the transfer. It is not automatic and it turns on the buyer's intended use, not the price alone.
Generally yes, because the IRS will not issue the stamped Form 8288-A Copy B without a taxpayer identification number, and you need one to file the return that claims your refund. You generally become eligible to apply on Form W-7 once there is a legally binding contract for the sale.
If you apply for a withholding certificate on Form 8288-B before closing, the IRS commonly acts within about 90 days. If you wait and claim the credit on a return instead, you typically cannot file until the following filing season and then wait several more months for processing.
It can. A single-member LLC is generally disregarded for federal tax purposes, so the IRS looks through to the foreign owner. Ownership structure changes the analysis rather than removing it, and should be reviewed before listing.
Levine CPA and Advisors advises foreign owners of Miami and South Florida real estate on withholding certificates, ITINs, and refund claims. Call (305) 912-0085 or contact us as soon as you decide to sell.
