FIRPTA Explained: What Foreign Buyers & Sellers Need to Know

FIRPTA is one of the most misunderstood parts of international real estate — but it is manageable once you understand it. Here is a plain-English explanation for buyers and sellers of Florida property.

What FIRPTA actually is

The Foreign Investment in Real Property Tax Act (FIRPTA) is a federal withholding mechanism — not an extra tax. It ensures a foreign seller pays U.S. tax on the gain from selling U.S. real estate by withholding a portion of the sale price at closing, which is later reconciled on a tax return.

The rates (it applies at sale)

FIRPTA matters most when a foreign person sells. Generally: 15% of the gross sale price is withheld if the price is over $1,000,000; 10% if it is between $300,000 and $1,000,000 and the buyer will use it as a residence; and an exemption may apply under $300,000 for a buyer who will use it as a residence. The numbers depend on the facts.

The buyer is the withholding agent

Importantly, the buyer (and closing agent) is responsible for withholding when purchasing from a foreign seller. That is why buyers need to know the seller's status — getting this wrong creates liability. A real estate attorney-broker makes sure it is handled.

Reducing or recovering FIRPTA

Foreign sellers can often reduce withholding by applying for a withholding certificate when the actual tax owed is less than the withheld amount, and they reconcile via a U.S. tax return. This is where a CIPS attorney-broker plus a cross-border CPA is invaluable. Talk to our international team →

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