FIRPTA (the Foreign Investment in Real Property Tax Act) is a U.S. federal tax law enacted in 1980 under 26 U.S.C. § 1445. It requires the buyer of U.S. real property sold by a foreign person to withhold a percentage of the gross sale price and remit it to the Internal Revenue Service (IRS). The withholding is not a final tax — it is a deposit against the foreign seller’s actual U.S. income tax liability, which is calculated when the seller files a U.S. tax return after the sale.
When a foreign person sells U.S. real property, the buyer is legally required to withhold 15% of the gross sale price and send it to the IRS using Forms 8288 and 8288-A within 20 days of closing. Because the withholding is based on the full sale price — not the seller’s actual profit — most foreign sellers are owed a partial or full refund after filing a U.S. nonresident tax return (Form 1040-NR).
What Is FIRPTA and Who Does It Apply To?
FIRPTA stands for the Foreign Investment in Real Property Tax Act. Enacted by the U.S. Congress in 1980, FIRPTA requires foreign sellers of U.S. real estate to pay U.S. income tax on any gain from the sale. Before FIRPTA, a non-resident seller could sell U.S. property and leave the country without paying U.S. capital gains tax, since the IRS had limited ability to pursue them abroad. FIRPTA solved this by requiring the buyer — not the seller — to act as the withholding agent.
FIRPTA applies whenever a foreign person sells a U.S. real property interest (USRPI). Understanding whether you qualify as a non-U.S. resident for tax purposes is the first step, since the IRS applies specific tests to determine residency status.
A foreign person for FIRPTA purposes includes:
- A nonresident alien individual (someone who is not a U.S. citizen and does not meet the green card or substantial presence test)
- A foreign corporation, partnership, trust, or estate
- A Canadian citizen or resident selling U.S. property
- Any non-U.S. resident, regardless of which country they live in
U.S. real property interests include land, residential homes, commercial buildings, and personal property associated with real estate use. If you are unsure whether FIRPTA applies to your transaction, contact Nolly’s FIRPTA specialists before your closing date.
How Does FIRPTA Withholding Work?
FIRPTA withholding is calculated based on the gross sale price — also called the “amount realized” — not the seller’s net profit. The amount realized includes the cash paid by the buyer, the fair market value of any property transferred, and any liabilities (such as a mortgage) assumed by the buyer.
Key point: Because withholding is based on the total sale price rather than the actual gain, the withheld amount is frequently much higher than the seller’s real tax liability. This is intentional — the IRS collects first and refunds the excess after the seller files a tax return.
FIRPTA Withholding Rates
Scenario
Withholding rate
Standard sale (any buyer, any use)
15% of gross sale price
Buyer uses as primary residence, sale price ≤ $1,000,000
10% of gross sale price
Buyer uses as primary residence, sale price ≤ $300,000 (with signed affidavit)
0% — withholding exemption applies
Important — the $300,000 exemption: For the 0% exemption to apply, the buyer must sign a written affidavit confirming they intend to occupy the property for at least 50% of the time during the first two years after closing. This exemption releases the buyer from withholding but does not eliminate the seller’s tax obligation — the seller must still file a U.S. tax return if a taxable gain exists.
Real-World Example
A Canadian citizen sells a Florida vacation home for $750,000 as an investment property. The buyer must withhold 15% of $750,000, which is $112,500, and remit it to the IRS — even if the seller’s actual capital gains tax on the transaction is only $30,000. After selling, the Canadian seller files Form 1040-NR and receives a refund of approximately $82,500. Filing promptly and correctly is essential to recovering these funds.
Key FIRPTA Forms Every Foreign Seller Must Know
Form
Purpose
Who files it
Deadline
Form 8288
U.S. Withholding Tax Return — reports the withholding amount to the IRS
Buyer (withholding agent)
Within 20 days of closing
Form 8288-A
Statement of Withholding — details the seller’s information and withheld amount. IRS stamps Copy B and returns it to the seller.
Buyer (filed alongside Form 8288)
Within 20 days of closing
Form 8288-B
Application for Withholding Certificate — requests IRS approval to reduce or eliminate withholding
Buyer or seller
Before or at closing
Form 1040-NR
U.S. Nonresident Alien Income Tax Return — reports the sale, calculates actual tax, and claims any refund
Foreign seller
Standard U.S. tax filing deadline (typically April 15)
Form W-7
Application for ITIN — required if the seller does not have a U.S. tax ID number
Foreign seller
Concurrent with or before filing 1040-NR
New as of September 30, 2025: The IRS now requires all FIRPTA withholding payments (Form 8288) to be submitted electronically via EFTPS (Electronic Federal Tax Payment System). Paper checks are no longer accepted for FIRPTA remittances. Buyers should register for EFTPS before closing if they have not already done so.
How to Reduce or Eliminate FIRPTA Withholding Before Closing
If you expect your actual U.S. tax liability to be less than the standard FIRPTA withholding amount, you can apply for a Withholding Certificate using IRS Form 8288-B. This is the most effective way to protect your cash flow at closing.
How Form 8288-B Works
Form 8288-B is an application asking the IRS to authorize a lower withholding rate based on your actual anticipated tax liability. You must submit it by the closing date.
Here is how the process works:
- Submit Form 8288-B to the IRS as early as possible. Aim to file at least 90 days before closing, since the IRS typically takes approximately 90 days to process withholding certificate applications.
- Notify the buyer in writing that you have filed. If Form 8288-B is filed on or before closing, the buyer may hold the withheld funds in escrow — rather than remitting them to the IRS — until the IRS responds.
- Wait for the IRS determination. The IRS issues an approval (for a reduced withholding amount) or a denial. If approved, the buyer remits only the reduced amount and returns the balance to the seller at closing or from escrow.
- If denied, the buyer remits the full standard amount. The seller can still recover excess withholding by filing Form 1040-NR after the sale.
When does Form 8288-B make sense?
Common situations where applying is beneficial:
- Your sale price significantly exceeds your actual gain (e.g., you bought at $600,000 and are selling at $700,000 — the gain is $100,000, but 15% withholding would be $105,000)
- You are selling at a loss or at your original purchase price
- Your home country has a tax treaty with the United States that reduces your effective rate
- You are selling through a 1031 like-kind exchange that qualifies for nonrecognition treatment
Nolly can prepare and file Form 8288-B on your behalf — learn more about our FIRPTA withholding and refund services or review our pricing.
Do You Need an ITIN for FIRPTA?
Yes. A valid U.S. Taxpayer Identification Number (ITIN or SSN) is required for all FIRPTA-related filings. Specifically:
- Both the seller’s and buyer’s tax ID numbers must appear on Form 8288-A
- Form 8288-B (withholding certificate application) requires the seller’s ITIN
- Form 1040-NR (the seller’s tax return to claim a refund) requires an ITIN
If you do not have an ITIN, you can apply using IRS Form W-7 at the same time as your other FIRPTA filings. However, obtaining an ITIN takes time — applying early prevents delays to your withholding certificate or refund. The full process you need to follow before selling U.S. property as a non-resident is worth reviewing before your closing date.
As an IRS-authorized Certifying Acceptance Agent (CAA), Nolly can certify your identity documents and process your ITIN application without requiring you to mail your original passport.
Foreign sellers who need an ITIN specifically because they’ve sold U.S. property will find a dedicated breakdown in this guide to getting an ITIN after a property sale.
After Closing: How to Claim Your FIRPTA Refund
Once the sale is complete and the buyer has remitted the withheld amount to the IRS, your next step is to file a U.S. nonresident tax return (Form 1040-NR). This return calculates your actual U.S. income tax on the gain from the sale. The withheld amount from Form 8288-A is applied as a tax credit against whatever you owe — and if the withholding exceeds your tax, the IRS refunds the difference.
For a complete step-by-step breakdown of this process — including how to prepare your documentation, what to attach, and what to expect — our FIRPTA refund guide for non-U.S. sellers covers each stage in detail.
FIRPTA Refund Timeline
Stage
Typical timeframe
Sale closes, and buyer remits withholding via EFTPS
Within 20 days of closing
Seller receives stamped Copy B of Form 8288-A from IRS
Several weeks after filing
Seller (or Nolly) prepares and files Form 1040-NR with Copy B attached
By April 15 of the tax year following the sale (or October 15 with extension)
IRS processes the return and issues a refund
Several months; delays are common for foreign sellers
Important: Refunds for foreign sellers can take significantly longer than for U.S. residents — sometimes 6 to 12 months or more, depending on IRS workload, documentation completeness, and ITIN status. Filing as early and as accurately as possible reduces the wait. Missing the stamped Copy B of Form 8288-A is a common cause of refund delays — keep it safe after the IRS returns it.
Not sure whether you need to file a 1040-NR? Our guide on who needs to file a U.S. nonresident tax return clearly explains the thresholds and filing requirements.
What Can Delay Your FIRPTA Refund and How to Avoid It
FIRPTA refunds are delayed most often by the following preventable problems:
Cause of the delay
How to prevent it
No ITIN or expired ITIN
Apply for or renew your ITIN before closing — Nolly can process this as a CAA
Missing stamped Copy B of Form 8288-A
Keep the IRS-stamped copy you receive after the buyer files Form 8288
Form 1040-NR filed without Copy B attached
Always attach Copy B to your 1040-NR when claiming the withholding credit
Incorrect cost basis or gain calculation
Document your purchase price, improvements, and selling costs carefully
Late or incomplete Form 8288 filed by the buyer
Ensure your buyer (or their title company) files within the 20-day deadline
FIRPTA withholding paid by paper check after Sep 30, 2025
All FIRPTA remittances must now be sent via EFTPS — paper checks are not accepted
FIRPTA Considerations by Seller Type
Canadian Sellers
Canada is one of the most common countries of origin for foreign sellers of U.S. real estate, particularly vacation properties in Florida, Arizona, and California. Canadian sellers are fully subject to FIRPTA withholding and must have a U.S. ITIN to file the required tax return. The full process for Canadian real estate investors buying or selling U.S. property covers both the ITIN and FIRPTA requirements specific to Canadian residents. The Canada-U.S. tax treaty may reduce the effective tax rate on the gain, but does not eliminate the withholding requirement — Form 8288-B can be used to apply for a reduced certificate based on treaty benefits.
Nolly’s ITIN services for Canadians are specifically designed for clients in this situation, with the added advantage that, as a Toronto-based CAA, we can certify your documents without the need for international mail.
Mexican Sellers
Mexican residents selling U.S. real estate are subject to FIRPTA in the same way as other foreign sellers. The United States and Mexico also have an income tax treaty that may reduce U.S. tax on the gain, but the withholding still applies at closing unless a reduced certificate is obtained in advance. Mexican residents earning other forms of U.S. income alongside a property sale will find the ITIN requirements for Mexican residents relevant as well.
Foreign-Owned LLCs and Corporations
If you hold U.S. property through a foreign LLC or corporation rather than in your own name, FIRPTA rules still apply. The withholding obligations and rates depend on the entity type and ownership structure. Foreign corporations are generally subject to 21% withholding on certain dispositions. Understanding whether your U.S. business structure requires an ITIN or EIN is an important first step before structuring the sale.
If you hold or plan to hold U.S. property through a U.S. LLC, the entity itself requires an Employer Identification Number (EIN) — separate from any personal ITIN. Non-residents considering U.S. business incorporation should factor in FIRPTA treatment when making entity-structure decisions early.
When FIRPTA Withholding Does Not Apply
Several exemptions can reduce or eliminate FIRPTA withholding. These must be documented before or at closing:
Exemption
Condition
$300,000 residence exemption
Buyer signs affidavit confirming primary residence intent for 50%+ of next 2 years AND sale price does not exceed $300,000
Seller is not a foreign person
Seller provides a Certification of Non-Foreign Status to the buyer, signed under penalties of perjury
Publicly traded corporation
The property interest is in a domestic corporation whose stock is regularly traded on an established securities market
No consideration paid
The seller receives $0 (e.g., a gift transfer)
Government acquisition
U.S. federal or state government acquires the property
Frequently Asked Questions
Is FIRPTA a tax or a withholding?
FIRPTA withholding is not a tax — it is a deposit held by the IRS on behalf of the foreign seller against their potential U.S. income tax liability. The actual tax is calculated when the seller files Form 1040-NR. If the withholding exceeds the tax owed, the IRS refunds the difference.
What if I sold U.S. property at a loss?
If you sold at a loss or at your original purchase price, you technically owe no U.S. capital gains tax. However, the 15% withholding still applies at closing unless you obtained a Withholding Certificate (Form 8288-B) in advance. After closing, you can claim a full refund by filing Form 1040-NR with documentation of your cost basis. Not applying for an ITIN when you need one — or applying too late — is one of the main reasons these refunds get delayed.
Can I avoid FIRPTA withholding entirely?
In most cases, no — the withholding applies at closing unless a specific exemption applies or a Withholding Certificate has been approved in advance. The most accessible exemption is the $300,000 residence exemption, which requires the buyer to be using the property as their primary residence. For other situations, Form 8288-B is the tool to reduce — not always eliminate — the withholding.
Do I need to file a U.S. tax return if FIRPTA was withheld?
Yes. Filing Form 1040-NR is how you calculate your actual tax liability and claim any refund of excess withholding. Even if you believe you owe no tax, filing is the only way to recover the withheld funds. Nolly’s U.S. tax return preparation service for non-residents covers this filing end-to-end.
How long does it take to get a FIRPTA refund?
After filing Form 1040-NR, foreign sellers typically wait several months for the IRS to process the return and issue a refund. IRS backlogs, documentation gaps, and ITIN issues are the most common causes of extended delays. Filing as early as possible after January 1 of the year following your sale — and ensuring all documentation is complete and correct — gives you the best chance of a timely refund.
Does FIRPTA apply if I sell through a U.S. LLC?
FIRPTA can still apply even when the property is held through a U.S. LLC or other entity, depending on the ownership structure. If the LLC is classified as a foreign entity or owned by a foreign person, FIRPTA rules apply to the sale. Consult a FIRPTA specialist before structuring a sale through an entity — Nolly’s team is available to advise before your transaction closes.
Work With Nolly's FIRPTA Specialists
Nolly (U.S. Tax Recovery Inc.) is an IRS-authorized Certifying Acceptance Agent based in Toronto, Canada, serving foreign sellers of U.S. real estate worldwide. Nolly handles every step of the FIRPTA process:
- ITIN application or renewal for the seller (certified without mailing the original passport)
- Form 8288-B preparation and filing — applied before closing to reduce withheld funds
- Coordination with the buyer’s title company on forms and deadlines
- Form 1040-NR preparation and filing to calculate actual tax and claim a refund
- Communication with the IRS throughout the process
Sources
All factual claims in this article are sourced from official IRS publications:
