A Venezuelan investor sells a $750,000 Brickell condo she’s owned for six years. The buyer is a U.S. citizen buying it as a primary residence. At closing, the title company wires $112,500 to the IRS — 15% of the sale price — before the seller sees a dime. She owes maybe $40,000 in actual capital gains tax, but that money is gone until she files a U.S. tax return and waits months for a refund. This happens every single day in Miami-Dade because of FIRPTA, and most foreign sellers don’t know it’s coming until they’re two weeks from closing.
FIRPTA stands for the Foreign Investment in Real Property Tax Act of 1980. It’s codified at 26 U.S.C. § 897 and § 1445. The rule is simple: when a foreign person sells U.S. real estate, the buyer must withhold 15% of the gross sale price and send it to the IRS within 20 days of closing. Not 15% of the profit. Not 15% of the net proceeds after paying off the mortgage. Fifteen percent of the contract price, calculated before anything else gets paid.
Miami-Dade has one of the highest concentrations of foreign-owned real estate in the country. Buyers from Latin America, Canada, and Europe own condos in Aventura, houses in Coral Gables, and investment properties across Kendall. FIRPTA comes up in residential closings here more than almost anywhere else in Florida. The problem is that most foreign sellers find out about it too late to do anything except hand over the cash.
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Who counts as a foreign person under FIRPTA
This isn’t about where you live. It’s about your U.S. tax residency status. A foreign person under FIRPTA includes nonresident aliens, foreign corporations, foreign partnerships, foreign trusts, and foreign estates. You can own three condos in Miami Beach, spend six months a year in Coconut Grove, and have a U.S. bank account — none of that makes you a U.S. person for tax purposes.
Tax residency for individuals depends on immigration status or the substantial presence test, which counts the number of days you’re physically present in the U.S. over a three-year period. Plenty of foreign sellers assume that because they have a Social Security number or file U.S. tax returns, FIRPTA doesn’t apply to them. That’s not how it works. If you’re not a U.S. citizen, green card holder, or tax resident under IRS rules, you’re foreign for FIRPTA purposes.
The flip side happens too. Say a Canadian couple owns a Miami condo but one spouse recently became a U.S. resident for tax purposes. If the property is titled jointly, half the sale may be exempt from FIRPTA and half may not. Title companies and closing agents in Miami-Dade see this all the time, and it requires splitting the withholding calculation. You need a tax professional who understands both U.S. and international tax law to sort it out before closing.
How the 15% withholding actually works at closing
The buyer is legally responsible for withholding the money and sending it to the IRS. In practice, the closing agent or title company handles it, but if the withholding doesn’t happen, the IRS goes after the buyer. The liability sits with the buyer even if their attorney or title company screwed up.
The amount is calculated on the amount realized, which is almost always the sale price stated in the contract. It doesn’t matter if the seller is walking away with $50,000 after paying off a $600,000 mortgage. The withholding is 15% of the full contract price. On a $900,000 sale, that’s $135,000 sent to the IRS before the seller gets anything.
The closing agent files Form 8288 and Form 8288-A with the IRS and remits the withheld amount within 20 days after closing. The seller gets a stamped copy of Form 8288-A, which they use when filing their U.S. tax return to claim credit for the withheld amount. If the actual tax owed is less than what was withheld — and it usually is — the seller eventually gets a refund. But that refund can take six months or longer, and you can’t get it without filing a U.S. tax return.
When FIRPTA doesn’t apply or gets reduced
There are three main ways to avoid or reduce FIRPTA withholding, and they come up constantly in Miami-Dade closings.
- Non-foreign affidavit
- If the seller is actually a U.S. person — citizen, resident alien, U.S. corporation, U.S. partnership — they sign an affidavit at closing stating that fact and providing their Social Security number or employer identification number. The buyer can rely on that affidavit as long as they don’t know it’s false. No withholding is required. This is a standard closing document in Florida, and title companies prepare it routinely.
- Residence use exception
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This one matters in a huge number of Miami-Dade transactions. If the buyer is an individual and will use the property as a residence for at least 50% of the time during each of the first two 12-month periods after closing, FIRPTA withholding is reduced or eliminated based on the sale price:
- If the price is $300,000 or less, no withholding.
- If the price is more than $300,000 but not more than $1 million, the withholding drops to 10% instead of 15%.
- If the price is over $1 million, the full 15% applies.
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The buyer confirms their intent to use the property as a residence by signing an affidavit at closing. The exception is not limited to U.S. citizens — a foreign buyer can claim it as long as they’ll actually live in the property. But it only applies to individual buyers. If the buyer is an LLC, a corporation, or a trust, the exception doesn’t apply even if a human being will live there.
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Example: A French national sells a $450,000 condo in Sunny Isles to a couple from New York who will live there full-time. The sale qualifies for the reduced 10% withholding instead of 15%, so the amount remitted to the IRS is $45,000 instead of $67,500. That $22,500 difference stays in the seller’s pocket at closing instead of disappearing into the IRS refund process.
- Withholding certificate (Form 8288-B)
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The seller can apply for a withholding certificate on Form 8288-B to reduce withholding when the 15% would massively exceed the seller’s actual tax liability. Common situations include sales where the seller has a high cost basis and will recognize little or no gain, or where the seller is doing a 1031 exchange and deferring the tax entirely.
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The application must be filed before or at closing. If filed on time, the buyer can hold the withheld funds in escrow instead of immediately sending them to the IRS while waiting for the IRS determination. The IRS can take months to respond. If the certificate is approved, the buyer remits only the reduced amount the IRS authorizes. If the seller waits until two days before closing to think about this, it’s too late.
The cash flow trap nobody warns foreign sellers about
Here’s what catches people. A seller bought a Miami condo in 2019 for $600,000. She’s selling it now for $650,000. Her actual capital gain is $50,000, and after the long-term capital gains rate and deductions, she might owe $10,000 in U.S. tax. But she still has a $450,000 mortgage balance. At closing, the title company pays off the mortgage, deducts closing costs and real estate commissions, withholds $97,500 for FIRPTA (15% of $650,000), and hands the seller whatever is left. In this scenario, the seller walks away with almost nothing even though she’s selling at a profit, because the FIRPTA withholding ate the equity.
She’ll get most of that $97,500 back when she files her U.S. tax return and the IRS processes the refund. But that can take half a year, and she has to file a nonresident tax return (Form 1040-NR) to get it. If she doesn’t have a U.S. taxpayer identification number — an ITIN for individuals or an EIN for entities — she can’t file the return and can’t get the refund.
Foreign sellers in Miami-Dade often don’t have ITINs because they’ve never filed U.S. tax returns before. The IRS has a process for obtaining an ITIN, and there are certifying acceptance agents in South Florida who help with applications, but it takes time. If you’re selling property and don’t already have an ITIN, start that process before you list the property, not after you close.
What buyers need to know about FIRPTA liability
Buyers don’t think FIRPTA is their problem. It is. If the seller is foreign and the buyer doesn’t withhold, the IRS can collect the full amount that should have been withheld directly from the buyer, plus interest and penalties. It doesn’t matter that the seller already left the country or that the buyer’s attorney told them it was handled. The statute puts the liability on the buyer.
Smart buyers in Miami-Dade insist on FIRPTA representations in the purchase contract. The standard Florida Realtors/Florida Bar residential contract has a FIRPTA section that requires the seller to disclose their status and cooperate with withholding requirements. Buyers also ask for proof at closing — either a non-foreign affidavit with the seller’s Social Security number, or confirmation that the title company is withholding and remitting the correct amount.
Example: A buyer purchases a $2 million Coral Gables house from a seller who claims to be a U.S. resident but is actually a nonresident alien. The buyer relies on the seller’s word and doesn’t withhold. Two years later, the IRS audits the seller, determines they were foreign, and comes after the buyer for $300,000 in withholding that should have been collected at closing. The buyer’s only recourse is to sue the seller, who is now back in Brazil. That’s not a theoretical risk — it happens.
How Miami-Dade closing agents handle FIRPTA in practice
Title companies and real estate attorneys in Miami-Dade deal with FIRPTA on a daily basis. The typical process starts at the contract stage. The listing agent or seller’s attorney discloses that the seller is foreign, and the contract addresses how FIRPTA will be handled. Sometimes the seller agrees to pay for a tax opinion or withholding certificate application. Sometimes the buyer agrees to hold funds in escrow while waiting for IRS approval of a reduced withholding.
Before closing, the title company orders a preliminary settlement statement that shows the FIRPTA withholding as a line item. If the seller is applying for a withholding certificate, the closing may be delayed until the IRS responds, or the parties agree to close with funds held in escrow. If the residence use exception applies, the buyer signs an affidavit confirming their intent to occupy the property.
At closing, the seller signs the deed and closing documents. The buyer or closing agent wires the withheld amount to the IRS. The closing agent prepares and files Forms 8288 and 8288-A within 20 days. The seller receives a stamped copy of Form 8288-A showing the amount withheld, which they need for their tax return.
The whole process runs smoothly when everyone knows what’s coming. It turns into a nightmare when the seller finds out about FIRPTA the day before closing and starts asking whether they can avoid it by having a friend sign an affidavit saying they’re a U.S. person. You can’t. The IRS has seen every version of that, and signing a false affidavit is perjury.
FIRPTA is federal, not Florida, but it still affects Florida taxes
Florida has no state income tax, so there’s no state-level capital gains tax when you sell real estate here. FIRPTA is entirely a federal tax issue under 26 U.S.C. § 1445. But Florida does impose a documentary stamp tax on deeds, which is calculated on the sale price and paid at closing regardless of whether the seller is foreign or domestic. In Miami-Dade, the doc stamp rate is higher than in most other Florida counties.
The FIRPTA withholding and the doc stamps are separate line items on the closing statement. Both get paid. The documentary stamp tax goes to the state of Florida. The FIRPTA withholding goes to the IRS in Washington. One has nothing to do with the other, but sellers sometimes confuse them or assume that paying Florida doc stamps means they’ve satisfied their federal tax obligations. They haven’t.
Corporate sellers and LLCs
When the seller is a foreign corporation or a foreign-owned LLC, FIRPTA still applies, but the analysis gets more complicated. If a foreign corporation directly owns a Miami office building and sells it, the buyer withholds 15% of the sale price just like with an individual seller. But if the foreign corporation sells stock in a U.S. subsidiary that owns the building, whether FIRPTA applies depends on whether the subsidiary is a U.S. real property holding corporation under 26 U.S.C. § 897(c)(2).
Single-member LLCs are common in Miami-Dade real estate. If the LLC is a disregarded entity for tax purposes — meaning it’s treated as a sole proprietorship — the IRS looks through the LLC to the owner. If the owner is a foreign individual, FIRPTA applies to the sale of the property. If the LLC is taxed as a corporation, corporate FIRPTA rules apply. If it’s a multi-member LLC taxed as a partnership, partnership withholding rules apply.
Sellers who own property through entities need to talk to a tax attorney before listing. The choice of entity affects not just FIRPTA but also estate planning, liability protection, and state-level taxes in the seller’s home country. Trying to restructure ownership two weeks before closing to avoid FIRPTA almost never works and can trigger immediate tax consequences worse than just paying the withholding.
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What to do if you’re a foreign seller planning to sell Miami-Dade property
- Start planning at least six months before you list. Confirm your tax residency status with a CPA or tax attorney who understands both U.S. and international tax law.
- If you’re a nonresident alien, calculate your expected capital gain and estimated U.S. tax liability. Compare that to the 15% withholding and decide whether applying for a withholding certificate makes sense.
- If you don’t have an ITIN, apply for one now. You’ll need it to file a U.S. tax return and claim a refund of over-withheld FIRPTA tax. The IRS has certifying acceptance agents in South Florida who can help. The process takes weeks, not days.
- When you list the property, disclose your foreign status to your real estate agent and make sure the listing agreement and purchase contract address FIRPTA. If you’re selling to an individual buyer who will occupy the property as a residence, confirm whether the sale price qualifies for the reduced 10% withholding or the full exemption under $300,000. That can save tens of thousands of dollars.
- Before closing, coordinate with the title company or your attorney to make sure the withholding calculation is correct and the forms are filed on time. If you’re applying for a withholding certificate, do it early and be prepared to hold funds in escrow if the IRS hasn’t responded by closing.
- After closing, work with your tax preparer to file your U.S. tax return and claim the refund. Don’t assume the IRS will automatically send it back.
If you’re buying property from a foreign seller, insist on proper documentation. Get a non-foreign affidavit if the seller claims to be a U.S. person. If they’re foreign, make sure the contract allocates responsibility for withholding and confirm at closing that the title company is handling it. Your liability for failing to withhold doesn’t go away just because you hired professionals. The IRS will come after you if the money doesn’t get sent, and at that point your only option is chasing a seller who’s already left the country.
FIRPTA withholding is one of the most misunderstood parts of Miami-Dade real estate transactions, and it costs foreign sellers millions of dollars a year in unnecessary over-withholding and delayed refunds. The law is clear, the mechanics are straightforward, and the planning opportunities are real. You just have to know about it before you’re sitting at the closing table watching 15% of your sale price disappear.
