FIRPTA and Florida Real Estate: What REALTORS and Buyers Need to Know When the Seller Is a Foreign National

Florida draws real estate buyers and investors from more than 50 countries every year. That means Florida agents regularly find themselves on the buy side of a transaction where the seller is a foreign national — and that changes the closing in a very specific way. The Foreign Investment in Real Property Tax Act (FIRPTA), enacted in 1980 and updated most recently by the PATH Act of 2015, requires the buyer to withhold a portion of the sale price and remit it directly to the IRS. If no one handles this correctly, the buyer becomes personally liable for the unpaid tax.

This guide explains FIRPTA in plain English — how it works, how much is withheld, where the exemptions are, and what your title company does to keep the transaction compliant. Coastal Collective Title handles FIRPTA closings across all of Florida and can guide both agents and buyers through every step.

What Is FIRPTA and Why Does It Exist?

FIRPTA is a federal tax law found at 26 U.S.C. § 1445. It exists because foreign sellers who profit on U.S. real estate may leave the country before paying any U.S. capital gains tax. Congress addressed this by shifting collection responsibility to the buyer: when a foreign person disposes of a U.S. real property interest, the buyer must withhold a percentage of the sale price at closing and send it to the IRS. The seller then files a U.S. tax return and either receives a refund or pays the balance owed.

According to the IRS, a "foreign person" under FIRPTA includes nonresident alien individuals, foreign corporations, foreign partnerships, foreign trusts, and foreign estates. U.S. citizens and lawful permanent residents (green card holders) are not foreign persons and are not subject to withholding.

How Much Does FIRPTA Withholding Apply?

The standard FIRPTA withholding rate is 15% of the gross sales price — not 15% of the gain, but 15% of the full contract price. On a $600,000 sale, that is $90,000 held back at closing regardless of what the seller paid for the property. A reduced rate of 10% applies when two conditions are met simultaneously:

1. The sales price is $300,000 or less, and
2. The buyer (or a family member) intends to use the property as a residence for at least 50% of the days the property is used during each of the two 12-month periods following the sale.

If the sales price is $300,000 or less and the buyer intends to use the property as a personal residence, withholding can be reduced to zero — but only for the buyer's primary or secondary personal residence, not investment property. The buyer must sign an affidavit confirming their intended use.

Who Is Responsible for FIRPTA Withholding?

The buyeris the withholding agent under FIRPTA. That is the starting point agents and buyers need to understand. If the buyer fails to withhold and remit, the IRS can collect the unpaid tax directly from the buyer — not the foreign seller who left the country. The buyer's exposure is capped at the lesser of the required withholding amount or the amount realized (the gain), but that is still a significant risk on a $500,000 transaction.

In practice, the title company acts as the buyer's agent for withholding mechanics. We calculate the withholding amount, hold the funds in escrow, file IRS Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests), and remit the funds within 20 days of closing. The seller receives credit for the amount withheld when they file their U.S. tax return.

What Exemptions Can Eliminate FIRPTA Withholding?

Several exemptions allow withholding to be reduced to zero at closing. The most common ones Florida agents encounter are:

• Non-foreign person certification: The seller signs a sworn affidavit under penalty of perjury stating they are not a foreign person. If the buyer accepts this in good faith and there is no actual knowledge it is false, the buyer is relieved of withholding liability. This is the most common exemption in Florida transactions involving sellers who have become U.S. citizens or green card holders.
• IRS withholding certificate (Form 8288-B): The seller applies to the IRS before closing for a certificate that reduces or eliminates withholding based on the actual tax expected to be owed — rather than the blunt 15% of the full price. This is especially valuable when the seller has a small gain relative to the sale price, or when the property is being sold at a loss. Processing typically takes 90 days, so the application needs to be filed well before the contract closing date.
• Publicly traded stock exemption: Dispositions of interests in publicly traded entities are generally exempt because the IRS has other means of collection.
• Domestic corporation exemption: If the seller is a domestic corporation (not foreign), FIRPTA withholding does not apply — though a qualified substitute statement or corporate affidavit is still needed at closing.

How Does the Title Company Handle FIRPTA at Closing?

A title company's role in a FIRPTA transaction is procedural, not legal. Here is the standard workflow at Coastal Collective Title:

1. We collect a FIRPTA affidavit or non-foreign certification from the seller at or before closing.
2. If no valid exemption applies, we calculate the withholding amount and segregate it from the seller's net proceeds at closing.
3. Within 20 days after closing, we file IRS Form 8288 and Form 8288-A and remit the withheld funds to the IRS on the buyer's behalf.
4. We provide the seller with their copy of Form 8288-A, which they attach to their U.S. tax return to claim credit for amounts withheld.

Buyers and agents should flag potential FIRPTA issues early — ideally when the contract is executed — so there is time to pursue a withholding certificate if the seller wants to reduce the holdback.

Does FIRPTA Apply Everywhere in Florida That CCT Serves?

Yes. FIRPTA is a federal law that applies uniformly to every real property transaction in the United States. Whether the property is in Miami-Dade, where international buyers are especially common, or in a smaller county like Citrus or Putnam, the same withholding rules apply whenever a foreign person is selling. Coastal Collective Title serves all 67 Florida counties, and our closing team is equipped to handle FIRPTA compliance regardless of where in the state the property is located.

What Should a REALTOR Do When the Seller Appears to Be a Foreign National?

Ask the question directly during listing or buyer's contract negotiations — do not wait until the week before closing to raise it. According to the National Association of REALTORS' FIRPTA guidance, agents have an obligation to make buyers aware of FIRPTA requirements as part of advising them on transaction costs. Here is a practical checklist:

• Confirm citizenship and residency status in the listing notes or during the listing presentation. This is not invasive — FIRPTA is a federal compliance matter, not a fair housing issue.
• Alert the buyer's agent as early as possible so both sides can plan around the 15% holdback or pursue a withholding certificate.
• Build extra time into the contract closing date if the seller wants to apply for a Form 8288-B withholding certificate — IRS processing takes up to 90 days.
• Select a title company with FIRPTA experience. Compliance errors on Form 8288 filings can result in penalties for the buyer.
• Recommend the seller retain a U.S. tax professional (CPA or tax attorney) before closing. The title company handles mechanics; only a tax advisor can advise on the seller's specific liability.

What Happens If FIRPTA Withholding Is Missed at Closing?

The IRS can assess the buyer for the unpaid withholding tax, plus interest and penalties, even after the seller has left the United States. In practice, enforcement actions are more common on commercial transactions and larger residential sales, but the exposure exists on any qualifying transaction. There is no cap on how long the IRS can pursue collection when FIRPTA was required and ignored.

If you discover after closing that FIRPTA should have applied and withholding was not done, the buyer should immediately consult a tax attorney. Voluntary disclosure to the IRS typically results in lower penalties than being assessed after an audit.

Lori LaCoppola

Owner & Managing Partner

Lori founded Coastal Collective Title to deliver a premium, relationship-first closing experience across Florida. With deep title industry expertise, she oversees every transaction with precision and personal attention.

813-544-8626lori@coastalcollectivetitle.com