FIRPTA Withholding: What Foreign Sellers of Miami Real Estate Need to Know

FIRPTA (Foreign Investment in Real Property Tax Act, 1980) requires buyers to withhold 15% of the gross sale price when purchasing real estate from a foreign national. The withholding is remitted to the IRS within 20 days of closing. Miami sees more FIRPTA transactions than any other US city because of the international buyer base, with Canadians, Argentines, Colombians, Brazilians, French nationals, and British nationals among the top seller nationalities (see my Canadian buyers guide, French buyers guide, British buyers guide, and Russian buyers guide for country-specific FIRPTA planning). If you are selling Miami real estate as a non-US person, you need to plan for FIRPTA before you list, not after you go to contract.

What Triggers FIRPTA

Any disposition (sale, exchange, gift, liquidation) of a US real property interest by a foreign person. Foreign person means non-US citizen, non-US resident, foreign corporation, or foreign partnership. Single-member LLCs owned by foreign persons are treated as foreign for FIRPTA. US residency for FIRPTA means substantial presence test or green card.

The 15% Withholding Amount

Standard withholding is 15% of the gross sale price. Not net profit, gross. On a $2M sale, that is $300,000 withheld regardless of whether you actually owe $300,000 in US tax. Reduced withholding rates apply in limited cases: 10% if the buyer will use the property as a personal residence and the sale is between $300,001 and $1,000,000; 0% if under $300,000 and personal residence. Most Miami luxury sales get the full 15%.

How to Reduce or Reclaim FIRPTA Withholding

Three paths. (1) Withholding Certificate (Form 8288-B): file with IRS before closing requesting reduced withholding based on actual expected tax. Takes 90 days. If approved, escrow can hold a reduced amount. (2) File 1040-NR after closing to reconcile actual tax owed against the 15% withheld; overpayment is refunded. Typical refund timeline: 6-18 months. (3) Apply for withholding reduction mid-transaction with CPA documentation. Requires buyer cooperation.

Common Mistakes

• Sellers who don't know FIRPTA applies until closing and are shocked by the 15% hit
• LLCs owned by non-residents who assumed US entity status exempts them (it doesn't for single-member LLCs)
• Failing to file 1040-NR in the year of sale, losing the refund
• Choosing a CPA unfamiliar with FIRPTA; standard US CPAs often miss the filing window

Pre-Sale Planning for Foreign Sellers

Three steps I walk clients through. First, engage a CPA who specializes in foreign-seller US filings 90-120 days before listing. Second, run tax projections to estimate actual US tax (often much less than 15%). Third, decide whether to file Form 8288-B for reduced withholding or accept 15% and file 1040-NR for refund. For sales under $3M, 1040-NR is usually simpler. For sales over $5M, Form 8288-B is usually worth the 90-day wait.

"FIRPTA is mechanics, not a tax. The actual tax you owe depends on your cost basis and holding period. Sellers who plan 90 days before listing almost always reclaim most of the withheld amount."

Planning to sell your Miami property and want a FIRPTA plan? Reach out and I will route you to a CPA who handles 100+ foreign-seller filings per year. For context on how FIRPTA mechanics play out at the top of the market, see my deep-dive on where $5M+ buyers actually transact in Miami.

"I've closed transactions with international buyers across multiple countries. The ones who arrived with a checklist of specific questions on reserves, deposits, and assignment terms, consistently negotiated better on final terms."Gerardo Gonzalez, Licensed Real Estate Agent at Compass

Frequently Asked Questions