FIRPTA is the most misunderstood item on the foreign buyer’s list. It is an exit mechanism, and it is not a tax on buying.
This page frames the mechanism. The calculation is for your tax adviser. Contact the desk at Miami Dossier for the current position on any building we cover.
The Foreign Investment in Real Property Tax Act requires that when a foreign person sells US real property, a portion of the gross sale price is withheld at closing and remitted to the IRS.
The headline rate is fifteen percent of the gross sale price, with reduced rates and exemptions available in defined circumstances, generally tied to the price and the buyer’s intended use as a residence.
The critical point: it is withheld on the gross price, not on your gain. If you sell at a loss, money is still withheld. It is a prepayment against a liability, not the liability itself.
The withheld amount is credited against your actual US tax liability on the sale. If the withholding exceeds what you owe, and it very often does, the excess is refundable.
You claim it by filing a US tax return for that year. That requires a US taxpayer identification number, and obtaining one takes time. A seller who starts the process at closing waits considerably longer for the money.
There is also a procedure for applying for a withholding certificate to reduce the amount withheld at closing where the actual liability will be lower. It must be applied for in advance, and that timing is the whole point of this page.
Your ownership structure determines how FIRPTA applies. Property held personally, through a US entity or through a foreign entity produces different treatment and different administrative consequences at exit.
Your taxpayer identification number can be obtained early rather than under time pressure years later.
And your records matter. Your basis in the property, the improvements you made, the costs you incurred, all determine your actual gain. Buyers who kept records recover more and faster than buyers who did not.
Do not treat FIRPTA as a cost of buying. It is not one. It is a withholding at exit that is substantially recoverable if you are organised.
Do treat it as a reason to settle your structure and your identification number at the start, because both are inexpensive then and expensive later.
We are not tax advisers and we do not compute this. What we will do is flag it early enough that your adviser can act on it, which is a service most buyers do not receive until they are already selling.
FIRPTA is recoverable if you prepared for it and slow if you did not. Ask the desk at Miami Dossier and we will make sure it is on the table before you sign.
We hold no inventory of our own and we are not the developer. Ask the desk at Miami Dossier and we will tell you what applies to your situation, what does not, and where we would not proceed. Here that starts with flagging it early enough for your adviser to act. Where the question is legal, tax or immigration, we will introduce you to advisers who handle that properly rather than answering it ourselves.