FIRPTA puts the tax burden on a surprising party: when you buy US real estate from a foreign seller, you — the buyer — are the withholding agent, and the IRS can collect the seller’s tax from you if the money never arrives. Most buyers learn this at the closing table. Understanding FIRPTA for buyers before you sign a contract turns an alarming rule into a routine checklist your closing agent handles every week.
Why the buyer is the withholding agent
The IRS cannot easily chase a seller who lives in Buenos Aires or Toronto after the wire clears. So the Foreign Investment in Real Property Tax Act flips the duty: the person handing over the money must hold part of it back. Our guide on what is FIRPTA covers the seller’s side of the rule; this article covers yours.
How much you must withhold
The default is 15 percent of the gross sales price — not the seller’s profit. Two exceptions matter. If the price is $300,000 or less and you will use the home as your residence, nothing is withheld. If the price sits between $300,000 and $1,000,000 and you will use it as your residence, the rate drops to 10 percent. Investment purchases never qualify for either break.
FIRPTA for buyers: Forms 8288, 8288-A, and the 20-day clock
FIRPTA for buyers runs on two forms and one hard deadline:
- Form 8288: the transmittal return you sign as withholding agent, reporting the sale and the amount withheld.
- Form 8288-A: the seller’s withholding statement, filed in duplicate so the IRS credits the seller for the deposit.
- 20 days: both forms and the withheld money are due at the IRS within 20 days after closing.
- Late means liability: the tax, penalties, and interest attach to you personally if the deadline slips.
In practice, the title company or closing agent prepares and files everything from escrow. Your job is confirming that someone clearly owns the task before closing day. The details live on the IRS Form 8288 page.
What protects you as the buyer
Two documents take you off the hook. A certification of non-foreign status — the seller swears under penalty of perjury that they are a US person, listing their taxpayer ID — ends the FIRPTA analysis entirely. And when the seller has filed a Form 8288-B to reduce FIRPTA withholding, the withheld amount waits in escrow until the IRS answers, instead of racing the 20-day clock. Never accept a verbal “I’m not foreign”; get the signed certification into the file. This article is general information, not tax advice; we coordinate with cross-border CPAs on every file.
A typical deal
A Miami investor buys a $480,000 Brickell condo from a Chilean owner. The contract flags the seller as foreign, so the title company withholds $72,000 — 15 percent — at closing. It files Forms 8288 and 8288-A with the payment on day 12 of 20. The seller’s stamped 8288-A copy later supports her refund on Form 1040-NR. The buyer signs two extra pages and never touches the risk. That is FIRPTA for buyers done right: routine, documented, and on time.
Buying from a foreign seller?
Alpha Equity Lending finances deals on both sides of FIRPTA — foreign sellers exiting and local buyers stepping in. If your purchase involves a foreign seller, tell us about it through our submit your deal page and we will make sure the financing and the withholding both close clean — in English or Spanish.
By Andres Jara — Alpha Equity Lending (NMLS #1855083). 20+ years in real estate finance, an MS in Finance, and an active South Florida investor and landlord.
