Real Estate Sales and Vacation Homes, including Stigmatized Properties
FIRPTA Withholding for Foreign Sellers
In the Florida real estate market, especially in high-demand areas like Orlando and near Disney World, FIRPTA (Foreign Investment in Real Property Tax Act) is a critical federal requirement that applies when a foreign person sells U.S. real property.
There are important exceptions and reduced-withholding rules, including no withholding for certain buyer-occupied residential purchases of $300,000 or less and a reduced 10% rate for certain residential purchases of $1 million or less. Because FIRPTA is a federal tax rule that can significantly affect a seller’s net proceeds, foreign sellers should speak with their title company, CPA, or tax attorney before closing to determine whether an exemption, reduced withholding certificate, or other relief may apply.
FIRPTA WITHHOLDING FOR FOREIGN SELLERS
In Florida, FIRPTA withholding requires buyers to withhold 15% of the gross sales price (or 10% for owner-occupied homes under $1M) on 2026 property sales by foreign sellers, remitting it to the IRS within 20 days. It applies to most foreign, trust, or corporation sellers, even if no capital gain is realized. Sellers get funds back by filing a U.S. tax return.
KEY ASPECTS OF FLORIDA FIRPTA WITHHOLDING
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Responsibility: The buyer is legally responsible for withholding the tax from the seller and ensuring it is sent to the IRS, not the seller. However, these funds are withheld at closing and the closing agent/attorney will handle this entire process for you.
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Rates: 15% of the gross sales price is standard, though a reduced 10% rate may apply if the property is $1,000,000 or less and intended for use as the buyer's primary residence.
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Exceptions:
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$300,000 Exception: No withholding is required if the sales price is $300,000 or less and the buyer intends to use the property as a home.
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Withholding Certificate: A Certificate of Reduced Withholding can be obtained from the IRS to lower or eliminate the amount.
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Timeline: Funds must be submitted to the IRS within 20 days of the closing which is usually done by the closing agent.
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Getting Money Back: Because 15% is a withholding and not a final tax, foreign sellers often receive a refund by filing a U.S. tax return to show their actual capital gains tax liability. The seller should consult a tax specialist with any questions.
FIRPTA FORMS & PROCESS
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Form 8288 and 8288A: These two forms are completed by the closing agent as part of the real estate closing transaction documents to report the withholding. Funds are withheld from the seller at closing by the closing agent.
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Steps for Sellers: Foreign sellers should engage a tax professional early to determine their exact liability and explore if they qualify for reduced withholding.
For more information, visit the official IRS website.
STANDARD WITHHOLDING RATES
The buyer is legally responsible for withholding a percentage of the gross sales price (not just the profit) and remitting it to the IRS within 20 days of closing. However, the closing agent/attorney will handle this for you. As of 2026, the standard rates are:
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15% Withholding: The default rate for most transactions, including investment properties and all sales over $1 million.
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10% Withholding: Applies if the sale is between $300,001 and $1,000,000 and the buyer signs an affidavit stating they intend to use the property as a personal residence.
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0% (Exemption): No withholding is required if the sales price is $300,000 or less and the buyer intends to use it as a primary residence
SPECIAL CONSIDERATIONS FOR THE DISNEY AREA
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Disney Vacation Club (DVC): Resale of DVC timeshare interests are legally deeded real estate in Florida and are subject to FIRPTA. Because many DVC resales occur at a loss or minimal gain, many international sellers are entitled to significant refunds.
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Short-Term Rentals: Properties near Disney are often used as vacation rentals. If the buyer intends to continue using the property as a short-term rental rather than a personal residence, the 15% withholding rate typically applies, even for properties under $1 million.
1031 EXCHANGE AND RESIDENTIAL EXCEPTIONS
1031 Exchange: In some cases, a foreign investor may structure a qualifying Section 1031 exchange to defer recognition of gain, which can support a reduction or elimination of FIRPTA withholding. However, this does not automatically remove withholding. Relief generally depends on the transaction fully qualifying for nonrecognition treatment and meeting IRS notice or withholding certificate requirements, often with coordination from a qualified intermediary, title company, and tax advisor.
Another important strategy is checking whether the sale qualifies for a residence exception. If the buyer intends to use the property as a residence and the amount realized is $300,000 or less, withholding is generally not required. If the property will be used as a residence and the amount realized is more than $300,000 but not more than $1,000,000, the withholding rate is generally 10% instead of 15%. Over $1,000,000, the general 15% rate usually applies.
In some transactions, withholding can also be reduced if the seller qualifies for a nonrecognition treatment or another IRS-approved exception. The IRS states that Form 8288-B may be used where the application is based on a claim that the transferor is entitled to nonrecognition treatment or that the transfer qualifies for a reduced amount under the rules.
STRATEGIES FOR REDUCING WITHHOLDING
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Withholding Certificate (Form 8288-B): Sellers can apply for this before closing to reduce or eliminate the withholding if they can prove their actual tax liability will be lower than the standard 15%.
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1031 Exchange: Foreign investors may use a 1031 exchange to defer capital gains taxes, which can sometimes lead to a reduction in FIRPTA withholding if structured correctly with a qualified intermediary. A qualified intermediary alone does not create FIRPTA relief; the exchange must actually qualify for nonrecognition treatment, and some deferred exchanges still require an IRS withholding certificate when a simple notice of nonrecognition cannot be used.
The most common strategy is applying for a withholding certificate on Form 8288-B. A foreign seller, buyer, or authorized agent can request IRS approval for reduced or even zero withholding when the standard withholding would exceed the seller’s actual expected U.S. tax liability, or when another qualifying basis applies. The IRS specifically recognizes Form 8288-B for reducing or eliminating withholding.
Timing matters. Even when a Form 8288-B application is submitted on or before closing, the buyer still has a withholding obligation. However, the IRS instructions say the buyer does not have to file Form 8288 and send the withheld funds until the 20th day after the IRS mails the withholding certificate or denial notice. That timing rule can help closers properly hold funds pending the IRS decision rather than over-remitting too early.
A practical issue that often delays reduction requests is the seller’s TIN/ITIN. The IRS says a seller seeking reduced or eliminated withholding through Form 8288-B needs a TIN, and if they do not have one, they may need to submit Form W-7 with the 8288-B package. Getting that handled early can be critical to making a reduction request work before or around closing.