Real estate has always been a strategic part of an investment portfolio, but for foreign investors, the strategy is more complex than it is for their U.S. citizen counterparts. A major part of that added complexity has to do with FIRPTA, short for the Foreign Investment in Real Property Tax Act.

If you are a foreigner preparing to buy or sell real estate in Miami, this post is for you.

What Is FIRPTA and Why Does It Apply to Foreign Sellers in Florida?

FIRPTA is a U.S. federal tax law designed to ensure that foreign investors pay taxes on the sale or disposition of U.S. real property interests. This is done by requiring buyers to withhold a portion of the gross sale proceeds (typically 15%) when purchasing U.S. real estate from a foreign seller.

In simple math, a $500,000 sale would mean $75,000 (15% of $500,000) would need to be withheld and sent to the IRS.

U.S. citizens are also required to pay income taxes on investment property sales by way of a capital gains tax (unless they leverage a tax deferral strategy like a 1031).

Who Qualifies as a Foreign Seller Under FIRPTA?

Under FIRPTA, a “foreign person” generally includes:

  • Non-U.S. citizens who are not considered U.S. tax residents
  • Foreign corporations
  • Foreign partnerships
  • Certain foreign trusts or estates

Citizenship alone does not always determine FIRPTA status. Tax residency, entity structure, and how the property is held can all affect whether the law applies.

Because of this, FIRPTA analysis should begin early in the transaction, not days before closing.

Who Is Responsible for Remitting the FIRPTA Withholding?

Instead of relying on the seller to voluntarily pay taxes later, FIRPTA shifts responsibility to the buyer by requiring withholding at closing. In most cases, the withholding amount is based on the gross sales price, not the seller’s profit. This means the withholding obligation can still apply even if the property is sold at a loss.

The percentage withheld is not necessarily the final tax owed. It functions more as a deposit until the actual tax liability is calculated upon filing the income tax return or receiving an approved withholding certificate from the IRS.

If the withholding is not handled correctly, the buyer can become personally liable for the amount that should have been withheld.

FIRPTA Exceptions: When Withholding May Be Reduced or Eliminated

Like any complex tax law, there are exceptions. Be sure to work with an experienced real estate lawyer who can help you understand your obligations and remain compliant with the law. FIRPTA exceptions may reduce or eliminate the withholding requirement for foreign investors in Florida, including:

  • Low-value property sales and use – If the property is sold for $300,000 or less and the buyer intends to use it as their residence for at least 50% of the time in the first two years of ownership, the withholding may be reduced or eliminated. In this case, the buyer would need to sign an affidavit attesting to their use of the property.
  • Reduced withholding certificates – Foreign sellers can apply for a reduced withholding certificate from the IRS if they believe the required amount exceeds the tax amount they owe. If approved, the IRS will adjust the withholding amount accordingly. The IRS may also issue a withholding certificate if the seller leverages a qualifying 1031 exchange.

Why FIRPTA Compliance Matters at Closing

FIRPTA compliance is not simply a tax issue. It directly affects the closing process, escrow disbursement, and transaction timeline. Title companies, attorneys, accountants, and closing agents need to coordinate to ensure all forms and affidavits are completed correctly and compliantly. Waiting until the last minute to address FIRPTA can create avoidable complications at closing.

If you are a foreign seller preparing to sell Florida property, our team at the Law Offices of Alex D. Sirulnik, P.A. and ADS Title Services, Inc., can help prevent delays, reduce risk, and ensure your closing stays on track. Contact us today to schedule a free consultation.

FAQs

What is FIRPTA and does it apply to me as a foreign seller in Florida?

FIRPTA (Foreign Investment in Real Property Tax Act) is a federal law that requires buyers to withhold a portion of the sale price, typically 15%, when purchasing U.S. real estate from a foreign seller. It applies to non-U.S. citizens who are not U.S. tax residents, as well as foreign corporations, partnerships, and certain trusts or estates. If you are selling property in Florida and are not a U.S. tax resident, FIRPTA almost certainly applies to you.

How much is the FIRPTA withholding on a Florida home sale?

The standard FIRPTA withholding rate is 15% of the gross sales price, not the seller’s profit. On a $500,000 sale, that means $75,000 is withheld at closing and remitted to the IRS. However, the withheld amount is not your final tax bill. It serves as a deposit against your actual tax liability, and you may receive a refund after filing a U.S. tax return.

Are there exceptions to FIRPTA withholding for properties in Miami or South Florida?

Yes. Two of the most common exceptions are: (1) the property sells for $300,000 or less and the buyer intends to use it as their primary residence for at least 50% of the time in the first two years, and (2) the seller obtains an IRS-approved reduced withholding certificate before closing. An experienced Florida real estate attorney can evaluate whether you qualify for an exception.

Who is responsible for the FIRPTA withholding, the buyer or the seller?

The legal responsibility for withholding and remitting the FIRPTA amount falls on the buyer. If the buyer fails to withhold the required amount, the IRS can hold the buyer personally liable for the taxes owed. In practice, the title company or closing attorney typically manages this process on closing day.

When should I start the FIRPTA process before closing on my Florida property?

As early as possible. If you plan to apply for a reduced withholding certificate from the IRS, processing can take 90 days or more. Starting FIRPTA analysis well before your closing date helps avoid delays, last-minute complications, and potential penalties.