FIRPTA is the federal rule that requires the buyer to hold back part of the price when a foreign person sells U.S. real estate. For most sales, the amount withheld is 15% of the sale price, not of the profit. The buyer sends it to the IRS, and the seller later files a U.S. tax return to get credit for it.
If you are a foreign owner of a Miami condo, FIRPTA does not stop you from selling. It changes how much cash you receive at closing and what paperwork you need. This guide explains how FIRPTA withholding works, using the rules published by the IRS.
What FIRPTA is
FIRPTA stands for the Foreign Investment in Real Property Tax Act. The withholding rule lives in Section 1445 of the Internal Revenue Code. It applies when a foreign person disposes of a U.S. real property interest, such as a condo, house or land.
The idea is simple. The IRS cannot easily collect tax from a seller who lives abroad, so it collects a prepayment at the source. That prepayment is the FIRPTA withholding.
FIRPTA withholding is not the final tax. It is a deposit toward the tax the seller actually owes on the sale, which is settled later on a U.S. income tax return.
How much is withheld
The general FIRPTA withholding rate is 15% of the amount realized. The IRS defines the amount realized as the cash paid (principal only), plus the fair market value of any other property transferred, plus any liability the buyer assumes. In a typical condo sale, that is essentially the sale price.
The key point: the 15% is calculated on the price, not on your gain. A seller with a small profit, or even a loss, still faces the full withholding unless an exception or a withholding certificate applies.
Worked example
A foreign owner sells a Miami condo for $500,000. Here is how the FIRPTA withholding changes depending on the situation:
Standard case: 15% of $500,000 = $75,000 withheld at closing and sent to the IRS.
Buyer will live in the condo as a residence: the reduced 10% rate can apply, so 10% of $500,000 = $50,000 withheld.
IRS withholding certificate obtained before closing: the amount withheld is whatever the IRS approves, which can be lower or zero.
In all three cases, the seller settles the real tax later on a U.S. return. The withholding is only a prepayment.
Exceptions and reduced rates
The IRS lists several exceptions to FIRPTA withholding. These are the ones most relevant to residential sales in Miami:
Residence under $300,000: no withholding is required when the buyer is an individual acquiring the property as a residence and the amount realized does not exceed $300,000.
Residence up to $1,000,000: when the buyer acquires the property as a residence and the amount realized does not exceed $1,000,000, the rate drops from 15% to 10%.
Seller is not a foreign person: a seller who is not a foreign person can give the buyer a written certification, under penalties of perjury, with name, taxpayer identification number and address. In that case FIRPTA withholding does not apply.
Withholding certificate: the IRS can issue a certificate that reduces or excuses the withholding case by case.
The residence exceptions depend on the buyer, not the seller. According to the IRS, the buyer or a member of the buyer's family must have definite plans to reside at the property for at least 50% of the days it is used during each of the first two 12-month periods after the transfer. If the buyer is an investor who plans to rent the unit, the full 15% generally applies.
Who withholds and when
In most cases, the buyer (transferee) is the withholding agent. The buyer must determine whether the seller is a foreign person. If the seller is foreign and the buyer fails to withhold, the IRS says the buyer may be held liable for the tax.
In practice, the title company or closing agent usually handles the mechanics at closing. The withheld funds come out of the seller's proceeds and are reported with two IRS forms:
Form 8288, the U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons.
Form 8288-A, the Statement of Withholding. Copies A and B are attached to Form 8288.
The deadline is short. The buyer generally must file Form 8288 and pay the withholding by the 20th day after the date of transfer. The IRS applies penalties for filing or paying late.
Getting the money back
After Form 8288 is processed, the IRS stamps Copy B of Form 8288-A and sends it to the seller. The seller then files a U.S. income tax return for the year of the sale and attaches the stamped Copy B to receive credit for the tax withheld.
The return calculates the actual tax on the gain. If the withholding is more than the tax owed, the difference is refunded when the IRS processes the return. If it is less, the seller pays the balance.
Why you need an ITIN
The IRS will not send the stamped Copy B if the seller's taxpayer identification number (TIN) is missing from Form 8288-A. Most foreign individuals do not have a Social Security number, so they need an Individual Taxpayer Identification Number (ITIN), requested with Form W-7.
The Form W-7 instructions include a specific exception for dispositions of U.S. real property by foreign persons, supported by FIRPTA documents such as Form 8288, 8288-A or 8288-B. Starting the ITIN process early avoids delays in getting credit for the withholding.
Applying for a withholding certificate before closing
If the 15% withholding would be much larger than the tax you will actually owe, you can apply to the IRS for a withholding certificate using Form 8288-B. The buyer, the seller or an authorized person can file it.
The IRS says it will generally act on these requests within 90 days after receiving a complete application, including all required taxpayer identification numbers. Build that time into your listing and closing calendar.
If the application is pending at closing, the seller must notify the buyer in writing on the day of or the day before the transfer. The amount withheld is then reported and paid within 20 days after the IRS mails the certificate or a notice of denial. The buyer still withholds at closing; only the payment to the IRS is deferred.
What foreign owners of Miami condos should plan for before listing
FIRPTA is easier to manage when you plan for it before your condo goes on the market. A practical checklist:
Hire a CPA with FIRPTA experience before you sign a listing agreement. Ask for an estimate of your actual tax on the sale.
Gather your purchase records: closing statement, cost of improvements and any assessments paid. These support your gain calculation.
Get or confirm your ITIN. Without a TIN, the stamped Form 8288-A copy is not released to you.
Decide on a withholding certificate. If your expected tax is well below 15% of the price, discuss Form 8288-B with your CPA and allow for the IRS processing time.
Model your net proceeds. Subtract the FIRPTA withholding, your mortgage payoff and closing costs so you know what cash you will receive at closing.
Tell the title company early that you are a foreign seller, so the forms and funds are handled correctly.
Plan for the U.S. tax return for the year of the sale. That return is how you receive credit for, and any refund of, the withholding.
Before listing, it also helps to know a realistic price. You can request a free home valuation to estimate your sale price and, from there, your FIRPTA withholding.
If you are buying from a foreign seller
Buyers carry the withholding responsibility, so FIRPTA matters on both sides of the table. Confirm early whether the seller is a foreign person, and tell the title company whether you plan to live in the property, since that can affect the rate. If you are a non-resident buyer yourself, our Spanish guide on buying in Miami without being a resident covers FIRPTA from the buyer's side.
Many foreign-owned condos are in Miami's high-rise neighborhoods. Our buyer's guide to 14 Brickell towers is a good starting point.
How we help
We do not prepare tax filings, but we coordinate the parts of the sale that FIRPTA touches. That includes pricing the condo, flagging foreign-seller status early to the title company, and keeping the timeline aligned with your CPA's work on the ITIN and any withholding certificate.
Floralba Núñez has more than 20 years of experience in U.S. real estate and works in English and Spanish. If you own a Miami condo from abroad and are thinking about selling, involve a CPA early and contact us to plan the sale step by step.
Sources
This article is general information, not tax or legal advice. Consult a qualified CPA or tax attorney about your situation. Floralba Núñez, Broker Associate · Finca Raiz International Realty Corp. Equal Housing Opportunity.