Selling Florida Property as a Foreign Owner? Read This First.

What is FIRPTA, and why does it matter when selling Florida real estate?

FIRPTA stands for the Foreign Investment in Real Property Tax Act. It’s a federal law that requires a portion of the sale proceeds from U.S. real estate to be withheld and sent to the IRS when the seller is a foreign person.

Florida sees a high volume of foreign real estate ownership, so FIRPTA comes up frequently at closings. If FIRPTA applies, it can significantly reduce the cash a seller receives at closing—unless proper steps are taken in advance.

Who is considered a “foreign person” under FIRPTA?

Under FIRPTA, a foreign person includes:

• Non-U.S. citizens who are not lawful permanent residents
• Foreign corporations, partnerships, trusts, and estates

Even sellers who live in the United States may still be considered foreign persons if they do not meet residency or citizenship requirements. This is why citizenship status—not location—controls FIRPTA obligations.

Does FIRPTA apply to all Florida real estate sales involving foreign sellers?

Not always, but it applies far more often than sellers expect. FIRPTA generally applies when:

• The seller is a foreign person, and
• The property sold is a U.S. real property interest

There are exceptions, but FIRPTA is the default rule unless a specific exemption applies. Buyers, closing agents, and sellers must confirm eligibility for any exemption before closing.

How much is withheld under FIRPTA?

In most cases, 15% of the gross sales price is withheld—not the seller’s profit.

This surprises many sellers. The withholding is based on the total purchase price, not on gain or net proceeds. That means FIRPTA can result in a large amount being held back at closing, even when the seller owes far less in actual tax.

Who is responsible for withholding and paying FIRPTA taxes?

Legally, the buyer is responsible for ensuring FIRPTA withholding occurs. However, in practice, the responsibility is usually handled by the closing agent or title company.

If FIRPTA withholding is missed, the buyer—not the seller—can be held liable by the IRS. That’s why buyers and title companies take FIRPTA compliance very seriously.

Are there any exemptions that allow sellers to avoid FIRPTA withholding?

Yes, and this is where advance planning matters. Common FIRPTA exemptions include:

• The buyer is purchasing the property as a primary residence and the purchase price does not exceed certain thresholds
• The seller provides a valid non-foreign affidavit
• The transaction qualifies for a reduced withholding certificate

Each exemption has strict requirements. Assuming an exemption applies without documentation can derail a closing.

What is a non-foreign affidavit, and why is it important?

A non-foreign affidavit is a sworn statement from the seller certifying that they are not a foreign person under FIRPTA.

If properly completed and truthful, it allows the buyer to proceed without withholding FIRPTA taxes. Providing false information, however, can carry serious legal and tax consequences.

Can FIRPTA withholding be reduced or eliminated before closing?

Yes. Sellers may apply to the IRS for a withholding certificate that reduces or eliminates the required withholding. This process typically involves demonstrating that:

• The seller’s actual tax liability will be less than 15%, or
• The seller qualifies for a specific exemption

Timing is critical. Applications must be submitted early, and closings may need to be structured carefully to avoid delays.

What happens to the withheld FIRPTA funds after closing?

The withheld funds are sent to the IRS as a prepayment of the seller’s U.S. tax liability. The seller then files a U.S. tax return to calculate the actual tax owed.

If the withholding exceeds the tax owed, the seller may receive a refund—but that process can take time.

Does FIRPTA apply to gifts, transfers, or inheritances of Florida property?

FIRPTA primarily applies to sales and exchanges, but certain transfers can trigger similar tax considerations.

Estate planning, gifting, or transferring property into trusts or entities can raise complex FIRPTA and tax issues. Sellers should not assume these transactions are exempt without professional review.

What are the biggest FIRPTA mistakes sellers make?

Some of the most common and costly mistakes include:

• Waiting until closing to address FIRPTA
• Assuming citizenship or residency status is “obvious”
• Confusing net proceeds with gross sales price
• Failing to apply early for a withholding certificate
• Providing incorrect affidavits

These errors can delay closings, reduce proceeds, or trigger IRS penalties.

What should Florida sellers do if FIRPTA might apply to their transaction?

The best step is early evaluation. Sellers should:

• Confirm their FIRPTA status well before listing the property
• Coordinate with legal and tax professionals
• Identify potential exemptions or reductions early
• Ensure closing documents are accurate and complete

FIRPTA is manageable with planning—but expensive when ignored.

What steps does a foreign seller need to take in a Florida FIRPTA transaction?

This is where FIRPTA becomes very real for sellers, because there are specific forms, deadlines, and IRS requirements that must be handled correctly to avoid delays or lost proceeds. A foreign seller in a Florida FIRPTA transaction will typically need to take the following steps:

First, the seller must confirm their FIRPTA status early. This includes determining whether they are considered a “foreign person” under IRS rules, which is based on citizenship and residency—not where they live or how long they’ve owned the property.

If FIRPTA applies, the seller should ensure they have an Individual Taxpayer Identification Number (ITIN). An ITIN is required to file U.S. tax returns and to recover any excess withholding. If the seller does not already have one, they must apply using IRS Form W-7, often with certified identification documents. Obtaining an ITIN can take time, so starting early is critical.

At closing, FIRPTA withholding is typically handled using:

• IRS Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests), and
• IRS Form 8288-A, which reports the specific transaction and is later stamped and returned by the IRS for the seller’s records.

If the seller believes the 15% withholding exceeds their actual tax liability, they may apply for a withholding certificate using IRS Form 8288-B. This application should be submitted as early as possible, and in many cases before closing, to avoid unnecessary withholding or delays.

After the sale, the seller must file a U.S. federal income tax return (typically Form 1040-NR for individuals) reporting the sale. At that point, the FIRPTA withholding is credited against the seller’s actual tax liability. If too much was withheld, the seller may be entitled to a refund.

To complete this process smoothly, sellers should be prepared with:

• Closing statements and settlement documents
• Purchase and sale agreements
• Proof of withholding and IRS forms
• Cost basis documentation and improvement records
• ITIN confirmation

Because FIRPTA involves coordination between the seller, buyer, closing agent, and the IRS, missing any of these steps can delay refunds or create compliance issues. Early planning and professional guidance can prevent costly mistakes and ensure the transaction closes without surprises.

Florida FIRPTA Seller Checklist:

• Confirm FIRPTA status (foreign vs. non-foreign seller)
• Obtain an ITIN (IRS Form W-7) if needed
• Coordinate FIRPTA withholding with closing agent
• Prepare and file IRS Forms 8288 & 8288-A
• Apply for reduced withholding if applicable (Form 8288-B)
• Retain closing documents and cost basis records
• File U.S. tax return (Form 1040-NR) after closing
• Track refund or tax credit from withheld funds

Selling Florida Property as a Foreign Owner? FIRPTA Isn’t Optional—But Surprises Are.

FIRPTA withholding can significantly impact your proceeds if it isn’t handled correctly. From ITINs to IRS filings, timing matters. Contact DuFault Law now to guide you through every step of a Florida FIRPTA transaction and avoid costly delays or unexpected withholding at closing.

• Call us at (239) 422-6400
• Email us at contact@dufaultlaw.com
• Or Visit our Contact Page to schedule a consultation