FIRPTA withholding is the tax a buyer must hold back when a foreign person sells a U.S. real property interest. The general rate is 15% of the amount realized (usually the sale price), with a 10% rate or no withholding when an individual buyer acquires a home to live in for $1 million or less or $300,000 or less. The buyer reports and pays the amount on Form 8288, with a Form 8288-A for each seller, by the 20th day after the date of transfer.
This guide covers how FIRPTA withholding works under Internal Revenue Code section 1445, who acts as the withholding agent, how to pick the right rate, how the 20-day filing works, and when a seller can ask the IRS for a withholding certificate on Form 8288-B. The rates and thresholds below are current as of October 2026, and the Instructions for Form 8288 were last revised in January 2026.
FIRPTA is the Foreign Investment in Real Property Tax Act of 1980. It authorized the United States to tax foreign persons on dispositions of U.S. real property interests, so the gain is taxable here even when the seller lives abroad. Section 1445 adds a collection step on top of that rule. Under the statute, "the transferee shall be required to deduct and withhold a tax equal to 15 percent of the amount realized on the disposition" of a U.S. real property interest by a foreign person (26 U.S.C. § 1445).
The withheld amount is a prepayment toward the seller's final tax. The foreign seller still files a U.S. income tax return for the year of sale, reports the actual gain, and claims the withholding as a credit. If the withholding is more than the tax, the seller receives a refund. If it is less, the seller pays the balance.
A U.S. real property interest covers more than houses. Land, buildings, condominium units and certain shares in U.S. real property holding corporations all count. The rules on the IRS FIRPTA withholding page apply whether the property is a vacation home, a rental building or commercial land. For how the underlying gain is measured, see this guide to capital gains tax on real estate.
The IRS states that "in most cases, the buyer (transferee) is the withholding agent." The buyer must find out whether the seller is a foreign person, and "if the transferor is a foreign person and the transferee fails to withhold, the transferee may be held liable for the tax" (IRS). When a U.S. business entity such as a corporation or partnership disposes of the property, the entity itself is the withholding agent.
In practice, a title company, escrow officer or closing attorney usually calculates the amount, holds it from the seller's proceeds and prepares the forms. The legal duty still sits with the buyer. Agents carry a narrower exposure. Under section 1445(d), an agent who knows a seller's certification is false and fails to give notice takes on the duty to withhold, but that liability is limited to the compensation the agent earns from the transaction.
A seller who is a U.S. person can avoid the whole process by giving the buyer a certification of non-foreign status. The IRS describes it as "a certification stating, under penalties of perjury, that the transferor is not a foreign person," and it should include the seller's name, U.S. taxpayer identification number and home address (IRS exceptions page).
The rate depends on who the buyer is and how the buyer will use the property. The residence rules apply only when one or more individuals buy the property, and the buyer or a family member "has definite plans to reside in the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer" (Instructions for Form 8288). Vacant days are ignored in that count.
| Situation | Amount realized | FIRPTA withholding |
|---|---|---|
| Individual buyer will use it as a residence | $300,000 or less | No withholding |
| Individual buyer will use it as a residence | $300,001 to $1,000,000 | 10% of the amount realized |
| Any other buyer or use (investor, company, rental, vacation home not used enough) | Any amount | 15% of the amount realized |
| Foreign corporation distributes a U.S. real property interest | Not applicable | 21% of the gain recognized |
Section 1445(b)(5) supplies the $300,000 exemption, and section 1445(c)(4) supplies the 10% rate by "substituting '10 percent' for '15 percent'" for residences where the amount realized does not exceed $1,000,000. The 15% general rate has applied since February 17, 2016. Older guides that quote 10% as the general rate are out of date.
The residence exceptions carry a risk for the buyer. If the buyer claims the exception and then does not live in the property for the required days, the IRS says the buyer "shall be liable for the failure to withhold" if the foreign seller did not pay the full tax, unless the failure came from a change in circumstances that could not reasonably have been anticipated.
The amount realized is "the sum of the cash paid or to be paid (not including interest or original issue discount), the fair market value of other property transferred or to be transferred, and the amount of any liability assumed by the transferee or to which the USRPI is subject" (Instructions for Form 8288). In most deals it equals the contract price. The base is the gross price, not the gain, which is why FIRPTA withholding often far exceeds the seller's real tax.
Form 8288 is the U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons. Form 8288-A is the Statement of Withholding, and the buyer prepares one for each foreign seller. The deadline is the same for both: "A transferee must file Form 8288 and transmit the tax withheld to the IRS by the 20th day after the date of transfer" (Instructions for Form 8288).
The filing steps are as follows.
After processing, "IRS will stamp copy B of Form 8288-A and send it to the transferor." The seller then attaches the stamped copy to a U.S. income tax return "to receive credit for any tax withheld" (IRS reporting page). The IRS also warns that a stamped Copy B "will not be provided to the transferor if the transferor's TIN is not included on that form." A seller without a number can apply for one with Form W-7 for an ITIN, and the IRS allows a nonresident alien to attach Form 8288-B to Form W-7 for this purpose.
The January 2026 revision of Form 8288 expanded line 22 with new lines 22b to 22d for direct deposit, so a refund on the form can now go straight to a bank account.
The Form 8288 instructions list several layers of exposure. Under section 6651, penalties apply for failure to file Form 8288 when due and for failure to pay the withholding when due. A buyer who was required to withhold and did not can have the tax, including interest, collected from them. Under section 7202 there is a penalty "of up to $10,000 for willful failure to collect and pay over the tax," and responsible corporate officers can face a section 6672 penalty equal to the amount that should have been withheld.
Because the 15% is charged on the gross price, many foreign sellers have far more withheld than they will owe. A withholding certificate lets the IRS approve a lower amount, or none at all, before the money goes out. The buyer, the buyer's agent or the seller may request one, and the application is generally made on Form 8288-B.
According to the IRS, "a withholding certificate may be issued due to" one of these grounds (IRS withholding certificates page):
The IRS "will generally act on these requests within 90 days after receipt of a complete application including the Taxpayer Identification Numbers (TIN's) of all the parties to the transaction." A seller who applies must tell the buyer in writing "on the day of or the day prior to the transfer." A treaty-based claim may also call for Form 8833 to disclose the treaty position on the seller's return.
The buyer still withholds. The instructions say "you must withhold even if an application for a withholding certificate is or has been submitted to the IRS on the date of transfer." The buyer does not have to file Form 8288 or send the money until "the 20th day after the day the IRS mails you a copy of the withholding certificate or notice of denial." In the meantime the title or escrow company usually holds the funds. If the IRS decides the application was filed mainly to delay payment, interest and penalties run from the 21st day after the transfer until the tax is paid.
Consider a nonresident individual who sells a Florida condominium for $850,000. Closing takes place on Thursday, 5 November 2026. The seller's adjusted basis is $560,000 and selling costs are $51,000. The figures below were checked in Python.
| Item | Buyer will live there | Buyer is an investor |
|---|---|---|
| Amount realized | $850,000 | $850,000 |
| FIRPTA withholding rate | 10% | 15% |
| Amount withheld | $85,000 | $127,500 |
| Form 8288 and 8288-A due | Wednesday, 25 November 2026 | Wednesday, 25 November 2026 |
The seller's gain is $850,000 minus $51,000 minus $560,000, which equals $239,000. Assume the seller's preparer estimates the maximum U.S. tax on that gain at $36,000 (an illustrative figure that depends on the seller's other income, holding period and any depreciation recapture). With an investor buyer, $91,500 more than the estimated tax is withheld. With a buyer who will live there, the excess is $49,000.
Without a withholding certificate, the seller waits for that excess until the IRS processes the seller's return for 2026, which for a nonresident individual is Form 1040-NR with the stamped Form 8288-A attached. With a certificate applied for well before closing, the IRS can set the withholding near $36,000 instead.
If the same condo sold for $300,000 to a family who will live in it, no FIRPTA withholding would apply. At $1,200,000, the 10% rate is no longer available, and an individual buyer who plans to live there would still withhold 15%, or $180,000.
FIRPTA withholding has close relatives that catch transactions outside a simple individual sale. A foreign corporation that sells U.S. property reports the gain on Form 1120-F and claims the withholding there. When a partnership owns the property, the rules under section 1446 come into play, and the partnership may need Forms 8804 and 8805 for foreign partners. Section 1445(e) adds separate withholding duties for domestic partnerships, trusts and estates, and for corporations that distribute U.S. real property interests.
Some states also require their own withholding when a nonresident sells property located there. Those rules are separate from federal FIRPTA withholding and differ by state, so the closing team should check the rules where the property sits.
The errors below show up often in practice.
CPA firms that see these sales a few times a year often keep a FIRPTA checklist inside a broader international tax workflow, or use real estate tax outsourcing support during busy season.
What is the FIRPTA withholding rate in 2026? The general rate is 15% of the amount realized. An individual buyer who acquires the property as a residence withholds 10% when the price is between $300,001 and $1,000,000 and withholds nothing at $300,000 or less, as of October 2026.
When is Form 8288 due? The buyer must file Form 8288 with each Form 8288-A and pay the tax by the 20th day after the date of transfer. If a withholding certificate application is pending, the deadline moves to the 20th day after the IRS mails the certificate or denial.
Who pays FIRPTA withholding, the buyer or the seller? The money comes out of the seller's proceeds, but the buyer is the withholding agent and can be held liable if the seller is foreign and the buyer fails to withhold.
Can a foreign seller get FIRPTA withholding reduced? Yes. The seller can apply on Form 8288-B for a withholding certificate, for example when 15% of the price would exceed the maximum tax on the gain. The IRS generally acts within 90 days of a complete application.
How does the seller get back excess FIRPTA withholding? The seller files a U.S. income tax return for the year of sale, such as Form 1040-NR, and attaches the stamped Copy B of Form 8288-A. Any withholding above the tax owed is refunded.
Madras Accountancy supports U.S. CPA firms with tax preparation and compliance work for cross-border clients, including real estate sales by foreign owners. To discuss help with FIRPTA withholding files, Form 8288 packages or nonresident returns, contact our team.
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