FIRPTA for Foreign Sellers
The 15% FIRPTA Tax on Your US Property: A Guide for Foreign Sellers
You built a solid US property portfolio and you are ready to sell. Then on closing day, 15% of your entire sale price disappears before you touch it, held by the IRS for potentially more than a year. With the right planning, most of that can be reduced or avoided. Here is what you need to know.
FIRPTA in seven points
- ✓ FIRPTA withholds 15% of the gross sale price, not your profit.
- ✓ It is based on the full amount realised: cash, property transferred and debts assumed.
- ✓ If the buyer will live there, withholding can drop to 10% ($300k-$1m) or 0% (at or under $300k).
- ✓ A Form 8288-B certificate filed before closing can cut withholding to your real liability.
- ✓ The buyer is the withholding agent and is personally liable if they get it wrong.
- ✓ Excess withholding is refundable by filing Form 1040-NR, but refunds can take many months.
- ✓ Tax treaties (US-UK, US-Spain and others) let you offset US tax against home-country tax.
What FIRPTA really means for your sale
The Foreign Investment in Real Property Tax Act imposes a 15% withholding on US real estate sold by foreign sellers, calculated on the gross sale price rather than the gain. It applies to the full amount realised, the cash you receive, any property transferred and any debt the buyer takes over. Sell a $1.2 million property for exactly what you paid, and the IRS still takes $180,000 off the top.
I worked with two overseas nationals, Cindy and Jimmy, who learned this the hard way. They sold their LA property for the same $1.2 million they paid. Zero profit, zero actual US tax owed. Escrow still withheld $180,000, and they spent over a year fighting to get their own money back. A US real property interest covers land, buildings, improvements, leaseholds and options, so most ordinary property sales fall squarely within the rules.
FIRPTA is 15% of the sale price, not the profit
Because the 15% is based on the total price, the withholding applies even if you sell at a loss. It is not necessarily the final tax. If your liability is lower, you can reclaim the excess, but only by filing a US return, which is where planning pays off.
| Sale price | Standard 15% | Residence $300k-$1m (10%) | Residence at or under $300k (0%) |
|---|---|---|---|
| $280,000 | $42,000 | n/a (under band) | $0 |
| $400,000 | $60,000 | $40,000 | n/a (over $300k) |
| $950,000 | $142,500 | $95,000 | n/a (over $300k) |
| $1,200,000 | $180,000 | n/a (over $1m) | n/a (over $300k) |
Protect your sale proceeds: book a call
Your path forward: a simple three-step solution
- Get expert guidance before you list. Speak to an international tax specialist 60 to 90 days before closing. They analyse your position, spot exemptions and check whether you qualify for reduced withholding. One conversation can save tens of thousands.
- Execute the strategy. Your adviser prepares the paperwork, including a withholding certificate application if you qualify, coordinates with your closing agent, and explains your real liability versus what gets withheld.
- File and recover your money. After closing, your adviser files your US return correctly to maximise the refund and handles the home-country side so you are not taxed twice.
FIRPTA exemptions: reduce your withholding
Not every sale triggers the full 15%. The main exceptions turn on the buyer’s intended use. If the buyer certifies they will use the property as a personal residence (living there at least 50% of occupied days in the first two years) and the price is $300,000 or less, no withholding is required. Between $300,001 and $1,000,000 for residence use, the rate drops to 10%. Any sale above $1,000,000, or any purchase that is not for residence use, takes the full 15%.
| Buyer will use as residence? | Amount realised | Withholding rate | Authority |
|---|---|---|---|
| Yes | At or under $300,000 | 0% (no withholding) | IRC §1445 |
| Yes | $300,001 to $1,000,000 | 10% | IRS |
| No, or any use | Over $1,000,000 | 15% | IRC §1445 |
You can also apply for a withholding certificate (Form 8288-B) when your actual liability will be lower than the standard withholding. The IRS usually processes these within 90 days, so apply early. Get approval before closing and only the reduced amount is withheld, keeping more money in your pocket immediately. Further exemptions apply where you can prove non-foreign status, dispose of interests in certain publicly traded corporations, or qualify for a nonrecognition exchange such as a 1031 exchange. Each needs specific documentation and timing; miss a deadline or file incomplete paperwork and you lose the chance to reduce withholding.
Identify the exemptions that fit your sale
FIRPTA compliance: who withholds, the forms and the deadlines
| Role | Primary forms | What is due | Standard due date |
|---|---|---|---|
| Buyer / transferee (withholding agent) | Form 8288 plus 8288-A (copies A and B) | Remit the withheld tax and file the forms | 20 days after transfer or closing (IRS) |
| Where 8288-B is filed in time | 8288-B, then later 8288 and 8288-A | Hold at closing; remittance can wait until the IRS decides, then file within 20 days | Per the 8288 instructions; deferral allowed pending the certificate |
Under FIRPTA the buyer is legally responsible for withholding and remitting the tax, which makes them the withholding agent. They must ensure the correct amount, usually 15% of the gross price, is withheld at closing unless a valid exemption or reduced rate applies. Get it wrong and the buyer can be personally liable for the unpaid tax, interest and penalties. The main forms are Form 8288 and Form 8288-A, both due to the IRS within 20 days of transfer with payment. Form 8288-A includes a copy the IRS stamps and returns to the seller, which the seller later uses to claim the withheld amount as a credit. If the seller files Form 8288-B for reduced withholding, the buyer can hold the funds until the IRS issues its decision, then remit the approved amount and file within 20 days. Because 8288-B can take more than 90 days, file well before closing.
Two worked examples
Example 1: selling in California
Jane, a UK resident in London, sells a California investment property for $500,000. As a foreign seller, the buyer withholds 15%, which is $75,000, at closing. Jane receives $425,000 and files a US Form 1040-NR to report the sale. If her actual liability is less than $75,000, she claims a refund of the excess. She also reports the sale to HMRC, where the US-UK treaty lets her offset the US tax against her UK liability, provided she follows the correct procedure to avoid double taxation.
Example 2: selling in Florida
Tom, also a UK resident, sells a Florida vacation home for $300,000. Because it is not the buyer’s residence, the 15% applies: $45,000 is withheld and Tom receives $255,000. He files a US Form 1040-NR to determine his real liability and claims a refund if the tax owed is lower. He reports the sale to HMRC and claims a foreign tax credit for the US tax paid, so the same gain is not taxed twice.
Getting your money back: the refund process
If the withholding exceeds your actual US liability, you recover the excess by filing Form 1040-NR, reporting the disposition and calculating the real tax due. You must include Copy B of Form 8288-A (the buyer’s withholding statement) and attach the settlement statements. Your refund equals the amount withheld minus the tax on your recognised gain.
The timing is the catch. You cannot file until the end of the calendar year of the sale, and IRS processing typically takes three to six months or longer, with some sellers waiting over a year. That money sitting with the IRS is money not earning a return elsewhere. You can often skip the wait by applying for a withholding certificate on Form 8288-B before closing; if approved, only the reduced amount is withheld in the first place.
Accelerate your refund or reduce withholding upfront
US and overseas tax: avoiding double taxation
Selling US property creates obligations both in the US and your home country. Without planning you can pay tax twice on the same gain, but US tax treaties provide relief. The US-UK treaty lets UK residents offset US tax paid against their UK liability through foreign tax credit relief: when you report the sale to HMRC, you claim credit for the US tax already paid. There is a similar US-Spain treaty with its own mechanics for real property gains.
Using treaty relief correctly means matching the right provisions to your income type, residency and timing, and the two countries run different tax years and deadlines. Some countries tax worldwide income; others are territorial. Understanding how your home country treats foreign capital gains, and what deductions, exemptions and reporting apply, is essential to claim relief in full and stay compliant.
Why expert guidance makes the difference
Withholding, exemptions, compliance, refunds and cross-border coordination form a complex web, and one misstep can cost tens of thousands or trigger penalties. An experienced international tax adviser understands both the US rules and your home country’s system. They identify exemptions you might miss, prepare withholding certificate applications to reduce upfront withholding, file the right forms on time, coordinate with closing agents, file your US return to maximise the refund, and address the home-country side to prevent double taxation. The cost of that guidance is usually far less than the savings from reduced withholding, faster refunds and avoided penalties.
Key takeaways
- ✓ FIRPTA withholding applies to the gross sale price, not your profit.
- ✓ Exemptions and reduced rates exist but need proper documentation and timing.
- ✓ The buyer is the withholding agent, but you should verify compliance.
- ✓ From 30 September 2025, FIRPTA payments are expected to be made electronically via EFTPS.
- ✓ Refunds take many months; a withholding certificate can remove the wait.
- ✓ Treaty provisions can prevent double taxation when applied correctly.
- ✓ State rules, such as California’s Form 593, can add another layer of compliance.
US and UK forms and treaty reference
| Form / document | Jurisdiction | Purpose | Applies to | Treaty article / context |
|---|---|---|---|---|
| W-8BEN | US (IRS) | Certifies foreign individual status and claims treaty rates on US income. | Individuals (UK residents with US income). | Arts 10, 11, 12 (dividends, interest, royalties). |
| W-8BEN-E | US (IRS) | Certifies foreign entity status for treaty benefits and FATCA. | Companies, trusts, partnerships. | Arts 10-12; cross-border entities. |
| W-9 | US (IRS) | Certifies US taxpayer status to prevent withholding. | US residents and entities only. | Establishes US residence (not treaty-based). |
| Form 8233 | US (IRS) | Claims treaty exemption from US withholding on personal-services income. | Non-resident individuals working in the US. | Arts 14, 15 (employment, independent services). |
| Form 8833 | US (IRS) | Discloses a treaty-based return position. | Taxpayers claiming nonstandard treaty benefits. | IRC §6114 (e.g. pension deferral, dual residence). |
| Form 8288 | US (IRS) | Buyer remits FIRPTA withholding on a US property sale. | US buyer / withholding agent. | FIRPTA (IRC §1445); Art 6 (immovable property). |
| Form 8288-A | US (IRS) | Filed with 8288; seller gets a stamped copy as proof of tax withheld. | Non-resident seller. | FIRPTA (real property). |
| Form 8288-B | US (IRS) | Requests a reduced FIRPTA withholding certificate before completion. | Non-resident sellers. | Art 6; FIRPTA relief mechanism. |
| Form 1040-NR | US (IRS) | Non-resident income tax return; reclaims excess withholding or reports ECI. | Non-resident individuals with US income. | Esp. Art 6 (real property), Art 17 (pensions). |
| Form 1120-F | US (IRS) | US income tax return for foreign corporations with US income. | Non-resident companies with US income. | Arts 7 (business profits), 23 (relief). |
| Form 8802 | US (IRS) | Applies for US residency certification (Form 6166). | US entities or citizens needing proof of US residence. | Needed for HMRC treaty relief forms. |
| Form 6166 | US (IRS) | Official US tax residency certificate supporting treaty claims. | US individuals or entities. | Evidence for UK HMRC treaty relief. |
| DT-Individual | UK (HMRC) | Claims UK relief or repayment for US residents with UK income. | US-resident individuals. | Arts 11, 12, 17 (interest, royalties, pensions). |
| DT-Company | UK (HMRC) | As DT-Individual, for US corporations. | US-resident companies. | Arts 10-12; UK-source passive income. |
| NRL1 | UK (HMRC) | Applies for gross payment under the Non-Resident Landlord Scheme. | Non-resident individual landlords. | Art 6 (immovable property). |
| NRL2 | UK (HMRC) | Gross payment application for non-resident corporate landlords. | Non-resident companies. | Art 6 (immovable property). |
| SA106 (foreign pages) | UK (HMRC Self Assessment) | Reports foreign income and claims foreign tax credit relief. | UK residents with US income. | Art 23 (relief from double taxation). |
| Check-the-box (Form 8832) | US (IRS) | Entity classification election; whether an LLC is transparent or opaque. | US LLCs with UK members. | Affects Arts 4, 5, 23. |
Frequently asked questions
What is the 15% FIRPTA?
FIRPTA is the Foreign Investment in Real Property Tax Act. It requires 15% of the sale price to be withheld when foreign persons sell US real estate, applied to the gross price rather than your profit, so the IRS can collect US tax on any gain.
Does it apply to the profit or the total sale price?
The total sale price, not the profit. 15% of the entire amount realised, including cash, property value and assumed liabilities, must be withheld, even if you sell at a loss.
Can I get a refund?
Yes. If your actual liability is less than the 15% withheld, you claim the excess by filing a US return (Form 1040-NR). You must wait until the end of the calendar year of the sale to file, and processing usually takes three to six months or longer.
Are there any exemptions?
Yes. If the buyer uses the property as a personal residence and the price is $300,000 or less, no withholding applies. Between $300,001 and $1,000,000 for residence use it drops to 10%. You can also apply for a withholding certificate where your real liability is lower, and other exemptions apply in specific cases, all needing documentation and timing.
What happens if I fail to comply?
The IRS can assess penalties and interest. If the buyer fails to withhold as required, they become personally liable for the unpaid tax, which can create disputes and delays. Proper compliance protects both seller and buyer.
Take control of your property sale
Act before you list, not on closing day. Plan the withholding, claim the right exemptions and keep more of your proceeds.
Author: Simon Misiewicz, FCCA, ATT, EA, CAA, MBA
Director, Optimise Accountants and InternationalTaxesAdvice.com
Simon is a UK Chartered Certified Accountant (FCCA), a member of the Association of Taxation Technicians (ATT), and a US IRS Enrolled Agent (EA) and Certifying Acceptance Agent (CAA), with over 20 years of cross-border tax experience. He specialises in US-UK tax coordination, dual-resident structures, FIRPTA compliance and international property and pension taxation. As co-founder of Optimise Accountants, Simon leads the firm’s international tax and estate planning work, advising private clients, property investors and family offices on treaty-based relief, foreign tax credits and succession planning across the UK, US and Spain.
This page is general information and not advice. Tax rules, rates and thresholds change. Take specialist advice before acting.
