You can reduce FIRPTA withholding before closing with a Form 8288-B withholding certificate, qualify for one of the exemptions built into the law, or recover the excess afterward with a US tax return. The 15 percent withholding lands on the gross sales price, so it routinely traps two or three times the tax a foreign seller actually owes. The law itself provides the exits. Sellers who start the paperwork when they sign the contract — not the week of closing — keep control of their money.
Why FIRPTA withholds more than you owe
Withholding is calculated on the full price; your real tax is calculated on the gain. Sell a property for $480,000 that you bought for $360,000, and the withheld $72,000 can dwarf a true tax bill closer to $19,000. If the rule itself is new to you, start with our guide on what is FIRPTA. The IRS eventually returns the difference, but “eventually” can mean many months. Shrinking the number at the closing table is almost always worth the effort.
The exemptions built into the law
- $300,000 residence exemption: no withholding when the price is $300,000 or less and the buyer will use the home as a residence.
- 10 percent tier: prices from $300,001 to $1,000,000 with a residence buyer withhold 10 percent instead of 15.
- Withholding certificate: caps the withholding at your actual maximum tax, whatever the price.
- Non-recognition transactions: a properly structured 1031 exchange can qualify for reduced or zero withholding with advance IRS approval.
Form 8288-B: the withholding certificate
File Form 8288-B with the IRS on or before the closing date, showing your purchase price, improvements, and expected tax. The IRS typically answers within about 90 days. Meanwhile the closing still happens: the title company holds the 15 percent in escrow instead of sending it to the IRS, then releases everything above the approved amount when the certificate arrives. You need ITINs for the sellers, so start that application early too.
Recovering whatever was still withheld
After the year of sale ends, file a US nonresident return — Form 1040-NR for individuals — attaching the stamped Form 8288-A from closing. The return computes your true tax and claims the rest as a refund. Additionally, sellers from countries that tax worldwide income, like Canada, can usually credit the US tax at home instead of paying twice. This article is general information, not tax advice; we coordinate with cross-border CPAs on every file.
A typical deal
A Colombian investor sells a Kendall rental for $480,000 that she bought years earlier for $360,000. Standard FIRPTA would trap $72,000 at closing. Her CPA files Form 8288-B before the closing date showing a maximum tax near $19,000, so the title company escrows the $72,000 instead of remitting it. The certificate arrives about ten weeks later: $19,000 goes to the IRS and $53,000 is released to her — months, sometimes a year, sooner than a refund would have come. She rolls the freed-up cash straight into the down payment on her next Florida rental.
Keep more of your sale at closing
Alpha Equity Lending helps foreign sellers across Florida and nationwide line up FIRPTA planning, ITIN applications, and the financing for their next purchase. Send your timeline through our submit your deal page and we will map the fastest route to your money — 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.
