A complete walkthrough of FIRPTA — what triggers it, what gets withheld, how to reduce or eliminate the withholding, and how to get your money home. Written for the seller, not the lawyer.
FIRPTA stands for the Foreign Investment in Real Property Tax Act of 1980 — codified as 26 U.S.C. § 1445 of the Internal Revenue Code. It's the U.S. tax law that says: when a foreign person sells U.S. real estate, the buyer must withhold a percentage of the sale price and send it to the IRS as an advance payment of the seller's eventual U.S. tax on the gain.
Without FIRPTA, foreign sellers could in theory close a sale, take the cash, and disappear back to their home country before paying U.S. tax. FIRPTA makes the buyer the "Withholding Agent" — and personally responsible — for collecting tax up front.
The headline number is 15% of the gross sales price. Not 15% of the gain, not 15% of profit. 15% of the entire sale price, before deductions, before basis, before commissions. This catches almost every foreign seller off-guard.
The trap: 15% of a $750,000 sale is $112,500 withheld. The seller's actual U.S. tax on the gain might be $30,000. Without intervention, the IRS holds the $82,500 difference for 12–18 months while a refund return is processed. This page is mostly about how to avoid that.
FIRPTA's definition is mechanical. You're a foreign person for FIRPTA purposes if you fall into any of these categories:
If you're not sure where you fall, this is one of the first things we determine in a no-charge intake call. Misclassifying triggers either over-withholding or buyer liability — both bad outcomes.
The standard FIRPTA withholding rate is 15% of the gross sales price. The buyer (or, in practice, the buyer's title or settlement agent) must:
After this, the seller files a U.S. tax return (Form 1040-NR for individuals) the following calendar year, claims a credit for the amount withheld, and receives a refund of the difference between the withholding and the actual tax owed.
This is where the cash flow problem lives. If your sale closes in May 2026, the earliest you can file a U.S. return claiming your refund is January 2027 — and IRS refund processing for nonresidents typically takes another 4–9 months. Money sits idle for over a year.
A handful of situations lower or eliminate FIRPTA withholding without filing a Withholding Certificate. Each has strict documentation requirements; we confirm eligibility in writing before relying on any of them.
No withholding at all.
10% withholding instead of 15%.
For sellers not actually foreign.
None of these are the same as the Form 8288-B Withholding Certificate. The certificate is a separate, more powerful tool — covered in the next section.
If the standard exceptions don't apply, the most powerful tool to reduce withholding is IRS Form 8288-B, the Application for Withholding Certificate. The form asks the IRS to authorize a reduced withholding amount equal to the actual expected tax on your gain — not 15% of the gross sale price.
Here's how it works in practice:
There's a separate $1,510 IRS user fee for processing the Form 8288-B application. We bill that as a passthrough — the firm doesn't mark it up. Combined with our preparation fee starting at $500, a Form 8288-B engagement is the highest-leverage move in FIRPTA practice.
An ITIN (Individual Taxpayer Identification Number) is a U.S. taxpayer ID issued to people who don't qualify for a Social Security Number but still need to file U.S. tax returns. For foreign sellers, an ITIN is required to:
We coordinate the ITIN application — Form W-7 under Exception 4 (FIRPTA) — in parallel with the FIRPTA filings. Exception 4 is specifically designed for FIRPTA cases and eliminates the usual delay caused by needing a tax return on file before the ITIN is issued.
IRS processing typically takes 7 to 12 weeks. If you don't already have an ITIN, this is one of the first things to start — even before contract signing if possible.
Here's what a well-run FIRPTA engagement looks like, anchored to the closing date:
Initial intake, FIRPTA applicability confirmed, basis and gain modeled, ITIN application filed if needed.
Form 8288-B application submitted to IRS Ogden. The 90-day clock starts. Funds will stay in escrow at closing.
Sale closes. Funds equal to the maximum withholding stay in escrow rather than being sent to the IRS.
IRS issues the Withholding Certificate. We work with the closing agent to release the over-withheld amount back to the seller.
Buyer remits the certified withholding amount to the IRS within 20 days of certificate ruling. Stamped 8288-A returned to seller.
U.S. tax return (Form 1040-NR) filed claiming credit for the certified withholding. Any small balance refunded.
The shorter version: done right, you walk away from closing with most of your sale proceeds in hand. Done wrong, you wait a year and a half to see your money.
FIRPTA hasn't changed dramatically in 30+ years, but the One Big Beautiful Bill Act (Public Law 119-21, enacted July 4, 2025) introduced several new rules that affect foreign sellers in 2026 and beyond:
If the U.S. classifies your home country as imposing "unfair foreign taxes" on U.S. persons (UTPRs, digital services taxes, diverted-profits taxes), a Section 899 surcharge applies on top of normal FIRPTA gain — starting at 5 percentage points and rising up to 20 percentage points over multiple years until the offending tax is repealed.
As of mid-2026, this affects sellers from a number of European countries. We confirm country status at intake. The list is updated annually and countries that repeal the offending tax are removed prospectively.
Effective January 1, 2026, a new 1% federal excise tax applies to most outbound transfers of funds from the U.S. The tax is collected by the wire transfer or remittance provider — and applies in addition to FIRPTA withholding (not as a credit against it). When you eventually wire your sale proceeds and refund home, expect that 1% to come off the top.
Transfers funded from a U.S.-issued debit or credit card are excluded. If you've maintained a U.S. bank account during the sale process, that account itself isn't subject to the 1% — only the transfer out of the country is.
The IRS issued a mandate requiring all FIRPTA withholding to be remitted electronically via EFTPS. The mandate has been postponed; the new effective date has not been announced. Paper checks may still be accepted in the interim, but buyers should enroll in EFTPS now since enrollment requires a valid U.S. Tax ID and a U.S. mailing address for the PIN, with 7–10 business days lead time.
Effective with the January 2026 form revision, the IRS now requires a separate Form 8288 for each separate disposition — and a separate Form 8288-A for each foreign seller. A sale with two foreign sellers and one buyer now requires two 8288-As where one combined form used to suffice. This drives per-seller pricing and, more importantly, requires careful coordination at multi-seller closings.
A practical problem nobody warns foreign sellers about until it's too late: the U.S. PATRIOT Act restricts U.S. banks from giving non-resident foreign account holders full access to their U.S. accounts. Once you're back in your home country and the sale is closed, opening or maintaining a U.S. bank account becomes difficult — and that's exactly when you need one to receive proceeds and any refund.
Practical strategies, in rough order of preference:
We don't take a referral fee for any specific payments service. We can recommend providers based on your country and the size of the transfer.
If you're already under contract or expect to be in the next 90 days, the order of operations is straightforward: