Foreign sellers of Florida real estate generally face federal FIRPTA withholding equal to 15% of the amount realized at closing, not 15% of their profit. The amount realized usually includes cash, other property transferred and liabilities assumed by the buyer. A lower 10% rate or a complete residence exception can apply to certain buyer-occupied transactions of $1 million or less. Sellers whose expected federal tax is below the statutory withholding can ask the Internal Revenue Service for a reduced amount through Form 8288-B.
That distinction matters in Miami, where international ownership, high property values and debt-financed transactions regularly produce a withholding deposit that is much larger than the seller’s eventual federal income tax. FIRPTA is primarily a collection system. It is not, by itself, the final calculation of the seller’s gain or tax liability.
Key takeaways
- The standard FIRPTA withholding rate is 15% of the amount realized.
- A qualifying residence purchase of no more than $300,000 can be exempt from withholding. A qualifying residence purchase above $300,000 and no more than $1 million generally carries a 10% rate.
- Paying off a mortgage at closing does not reduce the amount realized used for the withholding calculation.
- Form 8288-B can reduce withholding to the IRS-approved maximum tax liability, but timing and taxpayer identification numbers are critical.
- The buyer is normally the withholding agent and can be liable for missed withholding, tax, penalties and interest.
What FIRPTA does in a Florida property sale
The Foreign Investment in Real Property Tax Act treats gain or loss from a foreign person’s disposition of a U.S. real property interest as income effectively connected with a U.S. trade or business. The buyer, also called the transferee, generally must withhold and remit part of the transaction value. The rule applies nationally, including to sales of Florida houses, condominiums, commercial property and certain ownership interests in entities whose value is primarily tied to U.S. real estate.
The IRS FIRPTA guidance identifies the buyer as the withholding agent. If the buyer knows or has reason to know that a nonforeign certification is false, or otherwise fails to withhold when required, the IRS can pursue the buyer for the tax. That allocation of responsibility is why title companies and closing counsel typically place seller status, certifications and withholding mechanics near the front of the transaction checklist.
FIRPTA is separate from Florida documentary stamp tax, county property taxes, association assessments and the seller’s final federal return. Foreign owners evaluating a sale also need to distinguish the withholding rules from acquisition financing and ownership planning. MFR’s guides to foreign-national mortgages in Florida and LLC and trust structures for Florida property address those adjacent issues.
2026 FIRPTA withholding rates
The headline rate is 15%, but the buyer-residence rules can change the result. The residence tests depend on the buyer’s intended use, not the seller’s use of the property. IRS Publication 515 sets out the following framework.
| Transaction | General withholding rate | Core condition |
|---|---|---|
| Qualifying buyer residence, amount realized $300,000 or less | 0% | Buyer or family member has definite plans to use the property as a residence under the IRS occupancy test |
| Qualifying buyer residence, more than $300,000 and no more than $1 million | 10% | Same residence test |
| Amount realized above $1 million | 15% | Residence reduction is unavailable |
| Nonresidential or nonqualifying transaction | 15% | Standard rule applies unless another exception or withholding certificate applies |
| IRS withholding certificate approved | IRS-approved amount | Certificate can reduce withholding to the stated maximum tax liability |
For the complete residence exception at $300,000 or less, the buyer or a member of the buyer’s family must have definite plans to reside at the property for at least 50% of the days it is used during each of the first two 12-month periods after closing. Days when the property is vacant are not counted. The IRS exceptions guidance cautions that the buyer can be liable if the residence exception is claimed and the planned occupancy does not occur.
A buyer’s statement that a Miami condominium is an investment, short-term rental or occasional vacation property does not satisfy the residence test merely because it is residential real estate. Closing files should document the intended use and the amount-realized threshold supporting any reduced rate.
The amount realized is broader than the seller’s cash proceeds
The statutory percentage is applied to the amount realized. According to the IRS, that amount generally equals the cash paid, the fair market value of other property transferred and liabilities assumed by the buyer or attached to the property immediately before and after the transfer.
That formula can surprise a seller with a large mortgage payoff. Consider a foreign owner who sells a Miami condominium for $1.2 million and has an $800,000 mortgage satisfied at closing. Ignoring other closing items, the seller may receive roughly $400,000 before commissions and expenses. The standard FIRPTA deposit is still calculated from $1.2 million:
| MFR closing illustration | Calculation | Result |
|---|---|---|
| Amount realized | Contract consideration | $1,200,000 |
| Standard FIRPTA withholding | $1,200,000 x 15% | $180,000 |
| Approximate equity before transaction costs | $1,200,000 minus $800,000 mortgage | $400,000 |
| Withholding as a share of approximate equity | $180,000 divided by $400,000 | 45% |
This MFR calculation shows why FIRPTA can become a liquidity issue even when the seller has substantial equity. Mortgage debt reduces the cash delivered to the seller but generally does not reduce the amount realized. Commissions, legal fees and other selling expenses can affect the final gain calculation, but they do not automatically change the closing withholding base.
Withholding is not the final federal tax bill
The $180,000 in the illustration is a federal tax deposit collected through the closing. The seller later reports the disposition on the applicable U.S. federal income tax return, calculates taxable gain under the rules that apply to the seller and claims credit for the amount withheld. The final result can be a refund, an additional balance due or a tax liability close to the deposit.
The final calculation can depend on adjusted basis, capital improvements, depreciation, selling costs, entity classification, holding period, treaty considerations and other facts. A condominium purchased for $350,000 years earlier will have a different tax profile from a recently acquired property sold near its basis, even if both sell for $1.2 million and trigger the same standard withholding.
This is also why a 15% withholding rate should not be described as a 15% tax on a foreign seller’s profit. It applies to amount realized, while final federal tax is calculated separately. MFR’s analysis of foreign buyers in Miami real estate provides broader market context for the cross-border capital behind these transactions.
How Form 8288-B can reduce withholding
A seller or buyer can request an IRS withholding certificate when the statutory amount exceeds the maximum federal tax liability from the transfer. Form 8288-B is the principal application used for a certificate based on a calculation of maximum tax liability. The filing does not erase the tax. It asks the IRS to authorize a lower closing deposit that is better aligned with the documented transaction-level liability.
Suppose the $1.2 million sale in the MFR illustration produces a fully supported maximum tax liability calculation of $72,000. If the IRS approves that amount, the difference from the standard withholding would be:
| Illustrative certificate case | Amount |
|---|---|
| Standard 15% withholding | $180,000 |
| Illustrative IRS-approved withholding | $72,000 |
| Cash preserved at closing or released after approval | $108,000 |
| Reduction from standard amount | 60% |
The $72,000 figure is a hypothetical assumption used only to demonstrate the mechanics. An actual application must show the seller’s basis, expected gain, deductions and other supporting facts. It should be prepared from the transaction documents and the seller’s tax records.
The IRS withholding-certificate guidance says the agency generally acts within 90 days after receiving a complete application, including taxpayer identification numbers for the parties. That target makes early preparation important in a fast closing. Missing schedules, incomplete basis support or absent identification numbers can delay a determination.
Timing Form 8288-B around the closing
If the IRS receives Form 8288-B on or before the transfer date, the buyer must still withhold the required amount from the seller, but the buyer generally does not remit it immediately. Under the IRS reporting and payment rules, the funds are held until the agency issues the certificate or denial. The buyer then has 20 days after the IRS mails its determination to report and pay the required amount.
If no timely certificate application is pending, Forms 8288 and 8288-A and the payment are generally due by the 20th day after the transfer. This distinction creates two very different closing workflows:
- Timely certificate workflow: file a complete Form 8288-B by the transfer date, withhold at closing, hold the funds and remit the IRS-approved amount after the determination.
- Standard workflow: withhold at closing and remit the statutory amount with Forms 8288 and 8288-A within 20 days after transfer.
Filing Form 8288-B after closing generally does not create the same remittance hold. Sellers should not assume that a later filing will stop the buyer from meeting the 20-day deadline.
Taxpayer identification numbers can control the timetable
Form 8288-B requires U.S. taxpayer identification numbers. A foreign individual who is not eligible for a Social Security number may need an Individual Taxpayer Identification Number. The IRS ITIN guidance for foreign property sellers explains that a seller may submit Form W-7 under Exception 4 with Form 8288-B after entering a legally binding sale contract.
The IRS also uses Form 8288-A to credit the withholding to the seller. The agency generally stamps Copy B and sends it to the foreign transferor. The seller attaches that copy to the federal return used to claim the credit. When no taxpayer identification number is provided, the IRS says it will not issue the stamped copy, although the seller may later support the credit with substantial evidence. In practical terms, obtaining the correct identification number before the return and refund cycle can prevent avoidable reconciliation work.
Exceptions require evidence, not assumptions
Several FIRPTA exceptions and modifications exist, but each has conditions. A buyer can rely on a valid certification that the seller is not a foreign person, provided the buyer does not know the certification is false. Other rules can apply to certain publicly traded interests, domestic corporations that certify they are no longer U.S. real property holding corporations and transactions covered by IRS withholding certificates.
Ownership through an LLC, partnership, corporation, trust or estate does not automatically remove FIRPTA. The relevant seller, tax classification and U.S. real property interest must be identified. Joint ownership also requires allocation. IRS guidance generally allocates the amount realized among owners based on capital contributions, with a 50% allocation for spouses who jointly own the property.
For Miami’s cross-border market, those facts can intersect with succession planning and privacy structures. MFR’s Florida ownership-structure guide explains why the name on a deed is only the starting point. High-value transactions may also sit within the market dynamics covered in MFR’s 2026 ultra-luxury Miami analysis.
A closing checklist for foreign sellers and buyers
The most effective way to manage FIRPTA is to resolve status, pricing and certificate strategy before the final week of closing.
- Identify the transferor. Confirm who owns the asset and how any entity is classified for U.S. federal tax purposes.
- Test foreign status. Obtain and review any certification of nonforeign status. Escalate conflicting facts.
- Calculate amount realized. Include cash, transferred property and assumed or attached liabilities.
- Test the buyer-residence thresholds. Document intended use if the 0% or 10% rule is being considered.
- Model standard withholding. Compare it with the seller’s likely maximum tax liability and available closing equity.
- Decide on Form 8288-B early. Assemble the contract, basis records, improvements, closing estimates and identification numbers.
- Control the payment deadline. Track the transfer date, any timely certificate application and the applicable 20-day filing window.
- Preserve proof of credit. Maintain Form 8288-A records for the seller’s U.S. return.
The checklist is especially relevant as Miami grows as a hub for international wealth and banking. MFR’s review of Miami’s international banking cluster shows the financial infrastructure supporting cross-border property capital. FIRPTA remains one of the transaction-level frictions that converts that capital flow into documentation, escrow and timing risk.
Frequently asked questions
Is FIRPTA withholding 15% of the seller’s profit?
No. Standard FIRPTA withholding is generally 15% of the amount realized, which is usually much broader than profit. The seller calculates taxable gain and final federal tax separately on the appropriate U.S. return.
Does paying off a mortgage reduce FIRPTA withholding?
Generally, no. A mortgage payoff reduces the seller’s closing proceeds, but liabilities assumed by the buyer or attached to the property are generally included in the amount realized.
When can the buyer-residence exception eliminate withholding?
The complete exception can apply when the amount realized is $300,000 or less and the buyer or a qualifying family member has definite plans to use the property as a residence under the IRS occupancy test.
When is the FIRPTA rate 10%?
A 10% rate generally applies when the property will be used as a qualifying residence by the buyer and the amount realized is more than $300,000 but no more than $1 million.
What does Form 8288-B accomplish?
Form 8288-B requests an IRS withholding certificate. If approved, the certificate can reduce withholding from the statutory amount to the IRS-determined maximum tax liability supported by the application.
Who is responsible for sending FIRPTA withholding to the IRS?
The buyer is generally the withholding agent. The buyer normally files Forms 8288 and 8288-A and remits the amount due. A buyer who fails to comply can be liable for the tax, penalties and interest.
Sources and methodology
MFR reviewed current IRS FIRPTA guidance, the 2026 edition of Publication 515, Form 8288 instructions, the IRS pages covering exceptions, withholding certificates, reporting and payment, and ITIN procedures. The closing illustrations are original MFR calculations using stated hypothetical assumptions. Dollar results are rounded to the nearest $1,000 where applicable.
This analysis is for general informational purposes and is not legal, tax or accounting advice. FIRPTA outcomes depend on transaction-specific facts. Parties should consult qualified U.S. tax and legal advisers before relying on an exception, certificate application or withholding calculation.
Market intelligence. Capital insight. Delivered daily.
Miami Finance Review produces independent editorial analysis. Figures are attributed to their sources and independently cross-checked where possible. This content is informational and is not investment, legal, tax or lending advice.
