The Foreign Investment in Real Property Tax Act (FIRPTA) requires buyers of real estate from foreign sellers to withhold a portion of the sales proceeds and remit it to the IRS. With increasing global investment in Florida real estate—particularly in Miami, Orlando, and coastal markets—FIRPTA compliance is critical. Recent changes to the IRS enforcement and withholding thresholds have added complexity in 2025.
Who Is Affected by FIRPTA?
FIRPTA applies when a foreign person sells U.S. real estate. The law places the withholding burden on the buyer, who must:
- Withhold up to 15% of the gross sale price
- File IRS Form 8288 and remit funds within 20 days of closing
The seller may apply for a reduced withholding certificate if their actual tax liability is lower than the withheld amount—but this must be submitted before or at closing.
2025 Updates & Enforcement Trends
- Increased IRS scrutiny: The IRS is auditing FIRPTA compliance more aggressively, especially in high-dollar transactions.
- Stricter definitions of foreign ownership: Dual citizens and foreign-owned LLCs may trigger FIRPTA even if partially U.S.-controlled.
- Delays in withholding certificate processing: This can tie up funds for months if not addressed proactively.
What Buyers and Sellers Should Do
- Consult tax and legal professionals early in the transaction
- Identify the seller’s status upfront—rely on Form W-9 or W-8BEN
- Escrow FIRPTA funds at closing with a qualified intermediary or attorney
- Avoid closing without proper documentation to prevent buyer liability
FIRPTA is not optional. Mistakes can lead to tens of thousands in penalties and personal liability for buyers. Early planning and proper documentation are key to smooth cross-border real estate transactions.
