How Foreign Sellers Can Reduce or Recover FIRPTA Withholding

The short answer

FIRPTA withholding is 15% of the gross sale price, not of your profit. Two routes reduce it. Before closing, Form 8288-B asks the IRS to cut the withholding to your actual expected tax. After closing, a U.S. tax return reports the real gain and claims the excess back as a refund.

Key takeaways

• The default is 15% of the amount realized, which is usually the sales price, under section 1445.
• Form 8288-B is the pre-closing lever. The IRS generally acts within 90 days of a complete application, so the application has to start early.
• Two residence exceptions exist, at $300,000 and at $1 million, and both depend on what the buyer does with the property.
• The refund route always exists if you miss the certificate window. It is slower, not weaker.
• Form 8288 now supports direct deposit of refunds through new lines added in the January 2026 revision.

Strategy 1: Apply for a withholding certificate on Form 8288-B

A withholding certificate asks the IRS to approve a lower withholding figure before the money changes hands. The IRS issues one on defined grounds. Those include that “the amount that must be withheld would be more than the transferor’s maximum tax liability,” that the transferor is exempt from U.S. tax on all gain realized, or that the parties have an agreement with the IRS for payment of the tax with security (IRS: Withholding certificates).

The timing is the part sellers get wrong. The IRS “will generally act on these requests within 90 days after receipt of a complete application including the Taxpayer Identification Numbers (TIN’s) of all the parties to the transaction” (same source). Two things follow. The clock runs from a complete application. A missing ITIN for a seller, or a missing TIN for a buyer, stops it before it starts. And 90 days is what the IRS says it generally takes. It is not a ceiling it promises.

There is also a notification duty that is easy to miss: “A transferor that applies for a withholding certificate must notify the transferee in writing that the certificate has been applied for on the day of or the day prior to the transfer” (same source).

What the maximum-tax-liability calculation takes into account:

• Sale price minus selling costs such as commissions and title fees.
• Your basis, meaning the original purchase price plus documented capital improvements.
• Depreciation recapture if the property was ever rented.
• Your share of the property if ownership is partial or joint.

Because the default withholding is charged on the gross price while your tax is charged on the gain, the gap is widest on a property that has appreciated modestly and cost a lot to sell. That is the situation where a certificate does the most work.

The table below is an illustration of the arithmetic, not a projection of your result. Actual withholding depends on the IRS determination and on your own figures.

Scenario	Gross sale price	Actual gain	Withheld at closing
Default 15% FIRPTA	$1,000,000	$200,000	$150,000
Illustrative certificate amount	$1,000,000	$200,000	Tax determined on the $200,000 gain

The cash difference is not a tax saving. It is the same tax, collected at the right size and at the right time instead of being parked with the IRS until you file.

Strategy 2: The residence exceptions

Two exceptions turn on how the buyer will use the property, so neither is something a seller can trigger alone.

Amount realized of $300,000 or less: no withholding. The IRS states that if “one or more individuals acquire U.S. real property for use as a residence and the amount realized (in most cases, the sales price) is $300,000 or less, no withholding is required” (IRS: Instructions for Form 8288).

The residence test is more specific than the common summary of it. A property “is acquired for use as a residence if you or a member of your family has definite plans to reside in the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer” (same source). Read that carefully. It is 50% of the days the property is used by anyone. It is measured separately across each of two 12-month periods. Vacant days are left out of the count.

Two further points from the same instructions matter in practice. “No form or other document is required to be filed with the IRS for this exception,” so there is no affidavit that gets submitted to the government. And the exception “does not apply if the actual transferee (buyer) is not an individual, even if the property is acquired for an individual,” which rules out a purchase taken in the name of a company or a trust.

Amount realized of $1 million or less: 10% instead of 15%. The instructions state that “withholding is required at a reduced rate of 10% in the case of a disposition of: a property that is acquired by the transferee for use by the transferee as a residence, and the amount realized for the property is $1 million or less” (same source), with the $300,000 exception taking precedence below that level.

Above $1 million, these two residence bands stop applying. That does not leave you without options: a withholding certificate under Strategy 1 is available at any price, and it is the usual route on higher-value Southwest Florida sales.

Because the buyer carries the liability if the residence plan does not happen, buyers are often reluctant to rely on these exceptions. Treat them as a possibility to raise during contract negotiation rather than as something to assume.

Strategy 3: How the ownership structure changes the rule

Who or what holds the title changes which withholding rule applies, and this is the area where sellers most often receive confident, wrong advice.

A single-member LLC owned by a foreign person does not help. It is disregarded for federal tax purposes, so the foreign owner is treated as the transferor and section 1445 withholding applies as usual.

A domestic corporation as seller is not a foreign person, so a sale of the property by that corporation is not subject to section 1445 withholding on the sale itself. That is not the end of the analysis. The corporation pays its own tax on the gain. And stock in a U.S. corporation that qualifies as a U.S. real property holding corporation is itself a U.S. real property interest. Selling the shares can therefore bring FIRPTA back into the picture. Holding property in a corporation also carries annual costs.

Partnership interests follow a different section entirely, and this is the common mix-up. Section 1446(f)(1) “generally imposes a 10% withholding obligation on the buyer or other transferee (withholding agent) when an interest in a partnership is acquired from a foreign person (transferor)” if the transferor realized gain and any part of it would be effectively connected income (same source). That 10% applies to selling your interest in the partnership. It is not a lower rate for a multi-member LLC that sells the real estate. When the entity sells the property itself, the section 1445 rules govern. Section 1445(e) then sets out separate withholding duties on certain distributions and transactions by entities.

Restructuring ownership shortly before a sale rarely produces the result people hope for, and it can create new filing duties. Anything in this section should be tested against your own facts with an advisor before you act on it.

Strategy 4: Plan the timing

An installment sale spreads the proceeds across more than one tax year. That can change the rate that applies to your gain. It does not switch off the buyer’s withholding duty by itself. Installment sales are one of the recognized application categories for a withholding certificate, so the two are normally used together rather than as alternatives.

Like-kind exchange treatment is a separate question. A nonrecognition provision does not automatically remove the transferee’s duty to withhold. That is why “the exemption from U.S. tax of all gain realized by the transferor” appears as its own ground for a certificate (IRS: Withholding certificates). Plan the exchange and the certificate application as one sequence, well before closing.

Both routes need months of lead time, and both should be reviewed against your position in your home country as well as the U.S. rules.

Strategy 5: Recover the excess on a U.S. return

If the sale has already closed at 15%, the money is not lost. You file a U.S. return for the year of the sale, report the actual gain, and claim the withheld amount as a credit against the tax due. An individual files Form 1040-NR. A foreign corporation files Form 1120-F. Any excess comes back as a refund.

The January 2026 revision of Form 8288 added a payment route that did not exist before. The instructions state: “Direct deposit. You are now able to request your tax refund electronically deposited for free into your financial account,” and that “Line 22 has been expanded by adding lines 22b, 22c, and 22d for direct deposit” (IRS: Instructions for Form 8288, Rev. January 2026). For a seller who has left the country, that removes the problem of a paper check posted to an address they no longer use.

Filing the return is also what closes out your U.S. tax position for the year. Skipping it because the withholding already exceeded the tax leaves the obligation open and the refund unclaimed.

What we do for foreign sellers

• Pre-closing analysis. We work out the expected tax on the gain and whether a certificate application is worth the time your closing schedule allows.
• Form 8288-B preparation. We assemble the application and the supporting figures. We also confirm every party’s TIN is in hand before it goes in, because an incomplete application does not start the 90-day clock.
• Closing coordination. We work with your closing attorney and agent so the settlement statement reflects whatever the IRS approves.
• The U.S. return. We prepare the 1040-NR or 1120-F that reports the real gain and claims the credit.
• ITIN support. If you do not have a taxpayer identification number, we handle that alongside the sale, because it is a prerequisite rather than a formality. See our guide to the ITIN application process.

Outcomes depend on your figures and on the IRS determination, so treat this page as general information and speak to a professional about your own transaction.

If you already closed

Filing the return is the whole remedy. We review the closing documents, confirm what was actually withheld and reported on Form 8288 and Form 8288-A, and prepare the return that claims it back. The timeline is longer than the certificate route, and the amount you end up owing is the same either way.

• Start with the mechanics at FIRPTA withholding explained.
• For which form does what, see FIRPTA forms and exemptions.
• Read the International Tax and FIRPTA service for engagement details.
• Book a consultation and mention your closing date so we can prioritize an active transaction.

Sources: IRS, FIRPTA withholding; IRS, Withholding certificates; IRS, Exceptions from FIRPTA withholding; IRS, Instructions for Form 8288 (Rev. January 2026). Rules described are those in effect on 10 September 2026 and change from year to year.