FIRPTA Explained: What Foreign Buyers & Sellers of Miami Real Estate Must Know

FIRPTA is one of the most misunderstood parts of a Miami luxury transaction — and one of the most important when a foreign buyer or seller is involved. If you are purchasing from, or selling as, a foreign person, FIRPTA directly affects how much money changes hands at closing. Here is what it is and how to handle it well.

Quick answer: FIRPTA (the Foreign Investment in Real Property Tax Act) requires the buyer to withhold up to 15% of the gross sales price when the seller is a foreign person, and send it to the IRS. It is not a tax by itself — it is a prepayment against the seller’s potential U.S. tax. With proper planning, the amount can often be reduced or later reclaimed.

What Is FIRPTA?

FIRPTA is a federal law that ensures foreign owners pay U.S. tax on gains from selling U.S. real estate. Because the IRS cannot easily pursue a seller who lives abroad after closing, the law shifts responsibility to the buyer: the buyer must withhold a portion of the sales price and remit it to the IRS. You can read the federal overview directly from the IRS FIRPTA guidance.

The key mindset: FIRPTA withholding is not the seller’s final tax bill. It is a deposit. The seller’s actual tax is calculated on the gain, and any over-withheld amount can be refunded after filing.

How Much Is Withheld?

The standard FIRPTA withholding is 15% of the gross sales price, but the rate depends on the price and the buyer’s intended use:

• 0% if the sales price is $300,000 or less and the buyer will use the property as a residence.
• 10% if the price is between $300,001 and $1,000,000 and the buyer will use it as a residence.
• 15% for most other transactions, including nearly all luxury sales above $1,000,000.

At Miami’s price points, 15% is the number most sellers should plan around. On a $5,000,000 sale, that is $750,000 withheld at closing — which is exactly why planning ahead matters.

How Sellers Can Reduce FIRPTA Withholding

The most common tool is a withholding certificate (IRS Form 8288-B). If the actual expected tax on the gain is lower than the 15% withholding, the seller can apply to the IRS to reduce the amount held. When filed correctly and on time, this can free up significant cash at closing rather than waiting months for a refund.

Two things make this work: applying early, and working with a qualified U.S. tax professional who handles FIRPTA regularly. This is not the place for guesswork, and nothing here is tax advice — always confirm your specific situation with a CPA.

What Buyers Need to Know

If you are buying from a foreign seller, FIRPTA is partly your responsibility. The withholding is remitted under the buyer’s obligation, so your closing team — title company and attorney — must handle the paperwork correctly to protect you. In practice, an experienced closing team manages this smoothly, but you want to know it is being done right.

Buyers who are foreign nationals themselves should also understand financing and the broader tax picture. I cover financing in my guide for international buyers, and ongoing ownership costs in my Miami luxury real estate taxes guide.

How I Help Coordinate FIRPTA Transactions

On any transaction involving a foreign buyer or seller, I bring in the right professionals early — a FIRPTA-experienced CPA and a strong title company — so withholding, certificates, and timelines are handled before they become closing-day problems. Whether you are selling a Gables Estates estate or buying your first Miami property, getting this right protects your proceeds and your peace of mind.

If you are selling investment property and plan to buy again in Miami, a 1031 exchange may let you defer capital gains tax; foreign sellers should review both rules with a tax advisor.

Frequently Asked Questions

What is FIRPTA in simple terms?

FIRPTA is a U.S. law that requires the buyer to withhold up to 15% of the sales price when the seller is a foreign person, and send it to the IRS as a prepayment against the seller’s potential tax on the gain.

Who pays FIRPTA, the buyer or the seller?

The withholding comes out of the seller’s proceeds, but the buyer is legally responsible for withholding and remitting it. In practice, the closing team handles the mechanics on the buyer’s behalf.

How much is FIRPTA withholding?

Generally 15% of the gross sales price. It can be 0% or 10% for lower-priced homes the buyer will use as a residence, but most Miami luxury sales fall under the 15% rate.

Can FIRPTA withholding be reduced?

Yes. A seller can apply for a withholding certificate (Form 8288-B) to reduce the amount when the expected tax is lower than 15%. Apply early and work with a qualified tax professional.

Do I get FIRPTA money back?

Often, yes. FIRPTA is a prepayment, not a final tax. If more was withheld than the seller owes on the gain, the excess is refunded after filing a U.S. tax return.

FIRPTA is very manageable with the right preparation, and it should never be a surprise at closing. If you are buying from or selling as a foreign person in Miami, reach me at (786) 801-4442 or through my contact page, and I will make sure the right team is in place.

About Erika Schell
Erika Schell, P.A. is a Luxury Certified REALTOR® with The Keyes Company and a Forbes Global Properties affiliate, specializing in $1M+ residential real estate across Coral Gables, Cocoplum, Gables Estates, Key Biscayne, Pinecrest, South Miami, and Doral. With a Master’s in Finance, 20+ years of business experience, and 123+ successful transactions, Erika brings CFO-level pricing analysis and worldwide Forbes marketing to every luxury sale. Call or text (786) 801-4442. This article is general information, not tax advice.