If you're a foreign investor selling property or shares connected to U.S. real estate, you may be subject to FIRPTA withholding—even if you don't live in the United States. FIRPTA (Foreign Investment in Real Property Tax Act) is a federal law that requires buyers to withhold a portion of the sale proceeds when the seller is a foreign person.
Understanding when FIRPTA applies is critical to avoid unnecessary delays or penalties. At Cao & Associates, CPA, we help clients navigate these rules and maximize their refund opportunities.
🏠 Common Situations Where FIRPTA Applies
Here are the most common scenarios where FIRPTA withholding is required:
1️⃣ Sale of U.S. Real Property by a Foreign Individual or Entity
This is the most common case. If you're a non-U.S. citizen or foreign business selling real estate in the U.S., FIRPTA generally requires that 15% of the gross sales price be withheld at closing and sent to the IRS.
👉 Example: A nonresident sells a rental home in Seattle for $800,000. The buyer must withhold $120,000 (15%) and remit it to the IRS unless an exemption applies.
2️⃣ Sale of Shares in a U.S. Corporation That Is a USRPHC
Even if you’re not selling physical property, you may still trigger FIRPTA withholding if you’re selling shares of a U.S. Real Property Holding Corporation (USRPHC)—a company whose assets are primarily real estate.
👉 Example: A foreign investor owns shares in a U.S. real estate company and sells them. FIRPTA rules apply because the underlying value comes from U.S. property.
3️⃣ Distribution of U.S. Real Property Interests by a Foreign Corporation
When a foreign corporation distributes U.S. real estate assets (such as through liquidation or reorganization), FIRPTA applies to the value of the property distributed. This situation often arises in cross-border business restructuring or estate planning.
🚫 Are There Any Exemptions?
Yes! FIRPTA withholding may be reduced or eliminated in certain cases. A common exemption applies when:
✔️ The buyer acquires the property for use as a personal residence,
✔️ And the purchase price is $300,000 or less.
In such cases, the buyer can sign a statement at closing to avoid FIRPTA withholding altogether.
💡 How We Can Help
At Cao & Associates, CPA, we specialize in working with foreign sellers, international investors, and escrow companies to:
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Determine if FIRPTA applies to your transaction
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File Forms 8288, 8288-A, and 8288-B
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Apply for withholding certificates or ITINs
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File your U.S. tax return and recover any overpaid tax
We’ve helped clients recover tens of thousands in withheld tax, and we provide bilingual service in English and 中文.
📞 Need Help With FIRPTA? Let’s Talk!
Whether you're selling U.S. real estate or shares tied to it, our experienced CPA team can guide you through FIRPTA and help you keep more of your sale proceeds.
📧 Email: info@caoandassociates.net
📱 Call/Text: 425-230-7538 or 425-336-8675
We assist foreign sellers worldwide. Get peace of mind with professional support every step of the way.
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