If you are not a U.S. person for tax purposes and you sell property in Florida, the closing agent will hold back a percentage of the sale price and send it to the IRS. It is called FIRPTA withholding, and the part that surprises most sellers is that it applies to the price, not to your profit. You can sell at a loss and still have money withheld.
This is how it works, what the exceptions are, and what to prepare before you list. It is general information, not tax advice: FIRPTA is one of the areas where a CPA with real experience in these sales pays for itself.
Who FIRPTA applies to
The IRS defines a foreign person as "a nonresident alien individual or foreign corporation that has not made an election under section 897(i)... foreign partnership, foreign trust, or foreign estate. It does not include a resident alien individual."
So a green card holder, or someone who meets the substantial presence test, is generally not a foreign person for this purpose. Someone who owns a condo in Brickell and lives in Bogotá, Madrid or Caracas usually is.
What gets withheld
The rate is generally 15% of the amount realized, and the amount realized is the gross figure: the cash paid, the fair market value of any other property transferred, and any liability of the seller that the buyer assumes.
On a $600,000 sale, that is $90,000 held back at closing — before your mortgage payoff, before commissions, and regardless of what you originally paid for the property.
The residence exceptions
Two exceptions matter in practice, and both depend on what the buyer will do with the property:
- No withholding when the buyer acquires the property to use as a residence and the amount realized is not more than $300,000.
- 10% instead of 15% when the buyer will use it as a residence and the amount realized is more than $300,000 but not more than $1,000,000.
The condition is specific: the buyer or a member of the buyer's family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods after the transfer. It is the buyer who signs that statement, which is why this gets negotiated before closing, not at the table.
Who actually withholds, and when
The buyer is the withholding agent. In most South Florida closings the title company handles the mechanics, but the legal obligation — and the liability for getting it wrong — sits with the buyer.
The withholding is reported on Form 8288 and Form 8288-A, and both the forms and the money are due by the 20th day after the date of transfer.
How to withhold less than 15%
If the tax you will actually owe is less than what would be withheld, you can apply for a withholding certificate on Form 8288-B. The IRS may issue one when "the amount that must be withheld would be more than the transferor's maximum tax liability."
Three things to know about the timing:
- The application must be filed on or before the date of transfer, and the seller must notify the buyer in writing, on the day of the transfer or the day before, that a certificate has been applied for.
- The IRS normally acts within 90 days of receiving a complete application, including the taxpayer identification numbers of all parties.
- While the application is pending, the buyer does not have to file Form 8288 and send the money until the 20th day after the IRS mails the certificate or the denial.
That last point is the practical reason to start early: the difference between planning this two months before closing and discovering it two days before is the difference between a reduced withholding and a refund you wait a year for.
What FIRPTA is not
It is not your final tax bill. It is a prepayment. You file a U.S. tax return for the year of the sale, calculate the actual gain, and the amount withheld is credited against what you owe. If too much was withheld, the difference comes back as a refund — but on the IRS calendar, not yours.
You will also need a U.S. taxpayer identification number. If you do not have one, the ITIN application is part of the process and takes time.
What to do before you list
- Talk to a CPA who handles these sales, before the property goes on the market.
- Find your cost basis documents: the closing statement from when you bought, invoices for improvements, and records of what you have depreciated if it was a rental.
- Start the ITIN if you or any co-owner does not have one.
- Tell your closing agent early that FIRPTA applies, so the file is set up correctly from the first day.
- Run your net proceeds with the withholding in it. If you are counting on that money for another purchase, the timing matters more than the amount.
A second, separate point for owners abroad: FIRPTA is federal and applies whatever state the property is in. Florida's own rules — the flood disclosure, the condominium documents a buyer must receive, the documentary stamp tax on the deed — apply on top of it.
What this means for you
If you are selling from abroad, the withholding is not a surprise you handle at closing. It is a number you plan around from the moment you decide to sell: who the buyer is and what they will do with the property changes the rate, a Form 8288-B application can reduce it, and both take weeks, not days.