The Closing Itself
What Is FIRPTA Withholding on a Florida Home Sale?
Direct answer
FIRPTA is a federal rule that makes the buyer of U.S. real estate withhold tax when the seller is a foreign person. On a Florida sale, that withholding is generally 15% of the amount realized, taken from the seller's side at closing. A seller who is a U.S. person signs a certification instead, and nothing is withheld.
Key takeaways
- FIRPTA is federal. Florida has no state income tax withholding on a home sale.
- The usual rate is 15% of the amount realized, not 15% of the profit.
- An individual buyer who will live in the home can cut it to 0% at $300,000 or less, or 10% over $300,000 up to $1,000,000. Over $1,000,000, the rate is 15%.
- A seller who expects less tax can apply for an IRS withholding certificate on Form 8288-B before closing.
- Tell the title company at contract if any seller is not a U.S. person. It changes the settlement statement and the seller's net.
- This article is general information, not legal or tax advice. Confirm tax residency and the correct withholding amount with a U.S. tax adviser before closing.
What is FIRPTA withholding on a Florida home sale?
FIRPTA is the Foreign Investment in Real Property Tax Act of 1980. Under 26 U.S.C. section 1445, when a foreign person sells a U.S. real property interest, the buyer generally has to withhold 15% of the amount realized and send it to the IRS. A Spring Hill house, a Pasco condo, and a vacant Hernando lot all count.
The residence rules below are for a home the buyer will live in, so a vacant lot usually will not fit them. The withholding is not the seller's final tax. It is a prepayment. The seller files a U.S. return for the year of the sale and gets credit for the amount withheld. The IRS FIRPTA withholding page says the buyer is usually the withholding agent and can be held liable if the seller was foreign and nothing was withheld.
| Role | What FIRPTA asks of them |
|---|---|
| Seller who is a U.S. person | Sign a certification, under penalties of perjury, with name, U.S. taxpayer ID, and home address |
| Seller who is a foreign person | Expect withholding from the seller's side, or apply for a withholding certificate first |
| Buyer | Usually the withholding agent, and liable if required withholding is skipped |
| Closing agent | Collects the certification and shows any withholding on the settlement statement |
Who counts as a foreign seller in Florida?
A foreign person is anyone who is not a U.S. person. A U.S. citizen, or a resident alien for federal tax purposes, is a U.S. person even if they live in another state. Living in Ohio is not the test.
Many Hernando and Pasco owners who winter here and live in Canada or Europe the rest of the year may be nonresident aliens under this rule. Tax residency is a question for their tax adviser, not the closing file.
When owners are mixed, the IRS allocates the amount realized among them by capital contribution and treats a married couple as 50% each. The buyer withholds on the foreign owner's share. A U.S. spouse cannot claim 100% of the price to avoid it. If you live in another state and are a U.S. person, read selling a Florida house from another state instead. That is a different file.
How much is withheld, and when is a sale exempt?
The base rate is 15% of the amount realized. The amount realized is the cash paid, the fair market value of other property given, and any liability the buyer assumes. It is not the profit. Two buyer-side exceptions change the rate when an individual buyer buys the home as a residence, as the IRS exceptions page and Publication 515 explain.
To use either residence rule, the buyer or a family member must have definite plans to live in the home at least 50% of the days it is used during each of the first two 12-month periods after closing. A buyer who is buying a rental does not qualify. A second home can still qualify if the individual buyer, or a family member, will live there at least 50% of the days the property is used. Vacant days do not count. Each rule is measured on the total amount realized, not each owner's share.
| Situation | Withholding | Example on the amount realized |
|---|---|---|
| Individual buyer will live in it, amount realized $300,000 or less | 0% | $280,000 sale: nothing withheld |
| Individual buyer will live in it, amount realized over $300,000 up to $1,000,000 | 10% | $400,000 sale: $40,000 withheld |
| Individual buyer will live in it, amount realized over $1,000,000 | 15% | $1,200,000 sale: $180,000 withheld |
| Any other sale, including a rental or an entity buyer | 15% | $400,000 sale: $60,000 withheld |
Can a foreign seller reduce FIRPTA withholding?
Yes, by asking the IRS. The seller or the buyer can file Form 8288-B for a withholding certificate when 15% would be more than the seller's maximum tax, for example on a sale at a loss or a small gain. The IRS generally acts within 90 days after it receives a complete application, including taxpayer IDs for all parties.
A seller who applies must notify the buyer in writing on the day of, or the day before, closing. If the application is still pending on the closing day, the money is still withheld, but it does not have to be sent to the IRS right away. Under the IRS reporting rules, the withheld amount, or the lower amount the IRS approves, is paid within 20 days after the IRS mails the certificate or a denial. A seller without a U.S. taxpayer ID can apply for an ITIN on Form W-7 with the 8288-B, but only once there is a signed contract.
What happens to the money at a Florida closing?
The withholding is a seller-side charge on the Florida settlement statement, not a cost the buyer pays. Forms 8288 and 8288-A, and the withheld tax, generally go to the IRS by the 20th day after the transfer unless a Form 8288-B application is still pending.
Because 15% comes off the gross price, a seller with a large mortgage payoff can find there is too little cash left. Ask for a net sheet with the withholding shown before you list.
After those forms are filed, the IRS stamps Copy B of the 8288-A and sends it to the seller, who attaches it to a U.S. income tax return, often Form 1040-NR, to get credit or a refund. The closing agent also generally reports the gross proceeds to the IRS on Form 1099-S.
Say it at contract
Tell the title company and the buyer's agent that a seller is not a U.S. person. Do not wait for the closing week.
Check the buyer's plans
Ask whether an individual buyer will live in the home and whether the amount realized is over $1,000,000. That decides whether 0%, 10%, or 15% applies.
Decide on Form 8288-B
If 15% is more than the expected tax, the seller's tax adviser can file for a withholding certificate, with a Form W-7 if needed.
Close and withhold
The amount is held from the seller's proceeds and shown on the settlement statement. Confirm any wire by phone at a known number.
File for the credit
The seller files a U.S. return with the stamped Copy B of Form 8288-A to claim the withholding.
Which Florida rules still apply to a foreign seller?
Florida does not add a state income tax withholding on top of FIRPTA. Florida documentary stamp tax still applies to the deed at 70 cents per $100 of consideration. Read how documentary stamp tax works on a deed. Who pays it follows the contract, not the seller's citizenship.
The deed rules do not change either. The seller signs in front of two subscribing witnesses under section 689.01, and the deed needs an acknowledgment to be recorded under section 695.03. Read two witnesses and a notary on a Florida deed. For a seller abroad, section 695.03(3) accepts an acknowledgment before a notary public of that country with an official seal, or a U.S. consular officer. A seller who cannot sign at all may use an agent under a power of attorney that meets Florida's rules.
How should a foreign seller prepare the Florida title file?
Start early. Send the executed contract, each seller's tax status and any U.S. taxpayer ID, the mortgage information, and the buyer's answer about living in the home. If a withholding certificate may help, bring in a U.S. tax adviser before the contract is signed.
We collect the certification and show any withholding on the settlement statement. We do not decide who is a foreign person, and we do not give tax advice. For the steps the file goes through, see our closing services and escrow services. Listing agents in Spring Hill and the rest of Hernando County can flag a foreign seller on day one, or contact the office to open the file.
Frequently asked questions
Does FIRPTA apply if I live in another U.S. state?
Not if you are a U.S. person. A U.S. citizen or resident alien living in another state signs a non-foreign certification, and nothing is withheld under FIRPTA. Read selling a Florida house from another state.
Is FIRPTA withholding 15% of my profit?
No. It is generally 15% of the amount realized, which is the price plus any liability the buyer assumes. Your actual tax is figured later on your U.S. return, and any excess can be refunded.
Who pays FIRPTA withholding at closing?
The money comes from the seller's proceeds. The buyer is usually the withholding agent responsible for withholding it and reporting it to the IRS on Forms 8288 and 8288-A.
Is there a FIRPTA exemption under $300,000?
Yes, if an individual buyer is acquiring the home as a residence and the amount realized is $300,000 or less. The buyer or a family member must plan to live there at least half the days it is used in each of the first two years.
How long does an IRS withholding certificate take?
The IRS generally acts within 90 days after it receives a complete Form 8288-B application. If it is still pending at closing, the money is withheld and held until the IRS decides.
Do Canadian owners pay FIRPTA when they sell a Florida home?
A Canadian owner who is not a U.S. person for tax purposes is a foreign seller under FIRPTA, so withholding applies unless an exception or a withholding certificate covers the sale. Canadian tax on the same sale is a separate question for a Canadian tax adviser.