FIRPTA made simple: the 15% withheld when you sell (and how to get it back)
FIRPTA is the federal law that requires withholding up to 15% of the gross sales price when a foreign owner sells property in the United States. The key word is withholding: it is not a final tax you lose. It is a prepayment that is settled when you file, and the difference, when there is one, comes back to you. FIRPTA existing is not the mistake. Finding out about FIRPTA on closing day is.
What exactly is FIRPTA?
FIRPTA (the Foreign Investment in Real Property Tax Act) is how the United States makes sure it collects the tax on the gain when the seller is a foreign person. Because the seller does not live in the country, the government requires part of the price to be withheld at closing, before the money leaves the U.S.
It matters to understand what it is not: it is not a fine, it is not an extra tax reserved for foreigners, and it is not money lost. It is an advance collection of the tax that is owed on the gain from the sale anyway.
How does the 15% work in practice?
The withholding is calculated on the gross sales price — not on your gain. A plain example:
- You sell a property for $500,000.
- At closing, $75,000 is withheld (15% of the price), whether your actual gain was $80,000, $20,000, or you sold at a loss.
- Your actual tax is calculated later, on the gain, when you file your return.
That gap between "withheld on the gross" and "taxed on the gain" is why there is almost always money to recover.
How do you recover what was withheld?
- Annual tax return. You file your U.S. tax return for the year of the sale, calculating the actual tax on the gain. If what was withheld exceeds the tax, the difference is refunded.
- Reduction before closing. In certain cases you can ask the IRS for a lower withholding before the sale, by showing that the actual tax will be less than 15% of the gross amount. It is a filing prepared well in advance, not the week of closing.
- Taxpayer identification number. For either route you need your U.S. taxpayer identification number (ITIN) in order. Getting it in time saves you months of waiting with your money held.
The real lesson: FIRPTA is planned from the purchase
FIRPTA is a selling issue, but it is solved well when you think about it from the purchase. The structure you buy with (in whose name, with which tax ID, with which exit plan) determines how simple or how costly the day you sell will be. It is one of the reasons the A3 Methodology puts the legal and tax analysis on the table before you sign, not after.
FIRPTA is not the foreign investor's only tax front, either: rental income and the estate have their own rules. The full picture is in the guide to Florida taxes for the foreign investor.
In a 30-minute conversation we review your case and which structure leaves you best placed for the day you sell. No obligation.
Official sources
Frequently asked questions
Is FIRPTA a tax I lose for good?
No. It is a withholding: a prepayment. If the actual tax on your gain is less than what was withheld, the difference is refunded when you file.
How much is withheld when I sell?
The general rule is up to 15% of the gross sales price. On a $500,000 sale, that is $75,000 at closing, regardless of your actual gain. There is one exception: if the buyer will use it as a residence and the price does not exceed $300,000, nothing is withheld.
Does it apply if I sell at a loss?
The withholding still applies, because it is calculated on the gross. When you file, you show the loss and request the refund; there are also ways to reduce the withholding before closing, with tax counsel.
This article is general guidance for educational purposes and does not constitute legal, tax or financial advice. Each case is reviewed individually with licensed professionals within the A3 Methodology. Roberto Paredes acts as a Realtor®, not as a financial, tax or legal advisor.