Tax Services
FIRPTA & Foreign Real Estate
What foreign owners of US property need to know about FIRPTA withholding.
A Foreign Seller Can Lose 15% of the Sale Price to Withholding Before Closing Even Ends
FIRPTA requires buyers to withhold on real estate that foreign owners sell in the US - a flat 15% of the sale price by default, though a withholding certificate can bring that down to what's actually owed. If a sale like this is on your horizon, loop us in before closing.
We handle the withholding certificate paperwork that gets FIRPTA down to the real tax bill, and we chase refunds when too much gets held back.
Key Things to Know
- How the withholding rule works
- What buyers and sellers each owe
- A pre-closing checklist worth running
Ready when you are
Operational Milestones
Assess
Ahead of closing, we work out your actual US tax liability on the sale and check whether you qualify for reduced withholding.
Certify
If you do, we file Form 8288-B with the IRS to bring the 15% withholding down to what you actually owe.
Reconcile
Afterward, we prepare the nonresident return (1040-NR or 1120-F) that matches what was withheld against what's owed, and go after any refund due.
Included Services & Outcomes
The 15% Is Based on the Sale Price, Not Your Profit
FIRPTA requires buyers to hold back 15% of the gross sales price whenever a foreign seller disposes of US real estate - a number that's frequently well above the seller's actual tax bill. Skip the withholding certificate, and that money sits with the IRS for a year or longer.
Questions
FIRPTA & Foreign Real Estate FAQ
What does FIRPTA actually require?
The Foreign Investment in Real Property Tax Act makes buyers withhold 15% of the gross sales price whenever a foreign person sells US real estate, as an advance payment toward the seller's US tax bill. That withheld amount usually runs well past what's actually owed on the gain.
Is there a way to bring that 15% down?
There is. Filing Form 8288-B for a withholding certificate before closing lets you reduce the amount withheld to match your real tax liability. We prepare that application and coordinate directly with the closing agent so the lower figure is what actually gets withheld.
What if too much already got withheld - can I get it back?
You can, through a US nonresident return (1040-NR or 1120-F) that reconciles what was withheld against the actual tax due. We prepare that return and pursue the refund - though getting the withholding certificate beforehand avoids the wait in the first place.
Does FIRPTA come into play if I'm only renting out property, not selling it?
FIRPTA withholding itself is tied to sales, not rentals. That said, foreign owners renting US property face a default 30% withholding on gross rent unless they elect net-basis taxation - which we set up so you're taxed on actual profit rather than gross income.
Will I need a US tax ID number to complete the transaction?
Generally, yes - foreign buyers and sellers need an ITIN to file the necessary returns and claim any refund. We manage the ITIN application as part of the engagement so it doesn't hold up your closing.
Resources
FIRPTA & Foreign Real Estate insights
Talk to MK Tax & Accounting about firpta & foreign real estate
Book your free consultation. We'll look at your sale, quote a flat fee, and walk you through exactly what we'd handle differently.