When a foreign person sells a U.S. real property interest, § 1445 of the Internal Revenue Code requires the buyer (acting as withholding agent) to withhold a percentage of the amount realized at closing. This calculator computes the withholding due at the standard rates and at the reduced rates available for personal-residence transactions, and the effect of an IRS-issued withholding certificate authorizing reduced withholding under § 1445(c)(3).
FIRPTA withholding under § 1445 applies as follows:
The withholding amount is reported on Form 8288 and remitted to the IRS within 20 days of the closing. The seller receives a Form 8288-A and claims the withheld amount as a credit on the seller’s U.S. income tax return.
Important. The FIRPTA withholding obligation is the buyer’s personal liability, not the seller’s. Buyers and closing agents should not rely on representations about foreign-or-not-foreign status without verification. The withholding-certificate process under § 1445(c)(3) is fact-driven and document-intensive; certificates are routinely issued at rates well below 15% for sales producing modest gain or loss, but applications must be filed sufficiently in advance of closing or the closing will proceed at the default rate. State-level withholding may apply in addition to federal FIRPTA withholding (e.g., Florida and several other states have their own non-resident seller withholding regimes). This calculator does not address state withholding, depreciation recapture, foreign tax credit interactions, or partnership-level FIRPTA mechanics under § 1446(f).
The calculations above are based on simplified assumptions. To discuss your specific situation with the firm, contact us directly.
Contact The Firm