"Buying From a Foreign Seller: What Does FIRPTA Ask the Buyer to Withhold at Closing?"

The contract is signed, and the listing agent mentions that the sellers moved back to Ontario two years ago and will sign everything from there. Under federal tax law, that one line about Ontario may have just given your client a job at the closing table.

When the seller is a foreign person, the buyer is in most cases the FIRPTA withholding agent. The buyer holds back 15 percent of the amount realized and sends it to the IRS within 20 days on Form 8288. A seller's certification of nonforeign status removes the withholding, and a home your client will live in can bring it down to 10 percent or to zero.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, NMLS #483943, through C2 Financial Corporation, licensed in fifteen states. I wrote this for the buyer's agent, the closing attorney and the CPA who meet this question at the same closing table, and for the client buying the home. It is a question to settle in the contract, and often one document removes the withholding altogether.

FIRPTA is the Foreign Investment in Real Property Tax Act, and the withholding rule is in section 1445 of the Internal Revenue Code. Everything below comes from the IRS's own pages. The tax answer for a particular seller or buyer belongs with that person's CPA or tax counsel.

Who is the withholding agent under FIRPTA?

In most cases it is the buyer. The IRS page on withholding and reporting obligations says it plainly: "In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer, you must find out if the transferor is a foreign person." It goes on: "If the transferor/seller is a foreign person and you fail to withhold, you may be held liable for the tax."

The closing attorney or settlement agent can handle the paperwork, and the duty the IRS describes still belongs to your client.

IRS Publication 515 lists who counts as a foreign person. The list includes a nonresident alien individual and a foreign corporation, partnership, trust or estate. A foreign corporation can sometimes elect to be treated as a U.S. corporation for FIRPTA purposes, and the closing attorney can confirm whether that applies. A seller with a foreign address can still be a U.S. citizen or resident, which is what the certification below settles.

FIRPTA withholding rates, in one table

The IRS's FIRPTA withholding page puts the general rate at 15 percent, "10% for dispositions before Feb. 17, 2016." The Instructions for Form 8288 (Rev. January 2026) carry the residence rule and the 10 percent rate.

The purchase	Withholding, per the IRS	What has to be true
The seller is not a foreign person	None	The seller gives the buyer a signed certification of nonforeign status
A residence, amount realized of $300,000 or less	None	The buyer acquires it for use as a residence and meets the 50 percent test below
A residence, amount realized over $300,000 up to $1,000,000	10 percent of the amount realized	The same residence test
Any other purchase from a foreign person	15 percent of the amount realized	The general rule

The IRS lists other exceptions too, and the closing attorney will know whether one fits.

The amount realized, including an assumed mortgage

Every percentage in that table is figured on the amount realized. The IRS's FIRPTA exceptions page explains it as the total cash the buyer pays, plus the fair market value of any other property the buyer transfers, plus any debt or liability the buyer assumes. In most files, that is the sales price.

Two parts of that definition matter for a mortgage file. The $300,000 residence threshold is measured on the whole amount realized, so a home bought from two sellers is measured at its full price. And a loan your client takes over counts. If your client is assuming the seller's FHA or VA loan, the balance assumed is part of the amount realized, and it can push a purchase over the $300,000 line even when the cash is under it.

The seller's actual tax on the sale is figured separately, on the seller's own U.S. return, and the withholding is credited against it.

The certification of nonforeign status

This is the document that removes the withholding when the seller turns out not to be a foreign person. The Form 8288 instructions describe it as "a certification of nonforeign status from the transferor, signed under penalties of perjury, stating that the transferor is not a foreign person and containing the transferor's name, address, and TIN." A valid Form W-9 from the seller also counts.

Three details from the instructions:

• A qualified substitute can hold it. The seller can give the certification to a qualified substitute: the person responsible for closing, such as an attorney or title company (but not the seller's agent), or the buyer's agent. That person then gives your client a statement under penalties of perjury that it holds the certification.
• An LLC the IRS taxes as one and the same as its owner does not certify for itself. If one holds title, its owner is treated as the seller and provides the certification.
• The buyer keeps it for five years. The instructions say to keep any certification of nonforeign status "in your records for 5 years after the year of transfer."

If the seller is signing from abroad through an agent, closing on a home with a power of attorney covers the signing side.

The FIRPTA residence exception and the 50 percent test

The Form 8288 instructions say that if one or more individuals acquire the property for use as a residence and the amount realized is $300,000 or less, no withholding is required. Between $300,000 and $1,000,000, the same residence use brings the rate down to 10 percent.

For the home to count as a residence, your client or a family member has to plan to live there at least half the days it is used in each of the first two years after closing. The IRS's exceptions page puts it this way: "The transferee or a member of the transferee's family must have definite plans to reside at 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." The instructions add that days the property is vacant are not counted.

The instructions also say no form or other document has to be filed with the IRS for this exception. They then add: "if you do not in fact use the property as a residence, the withholding tax may be collected from you."

A client buying the home they will live in usually meets it plainly. A client buying a vacation property they plan to rent out part of the year has a real question to work through with their CPA, and second home versus investment property covers how the lender looks at the same plans. It makes sense to put your client's plans in writing in the closing file, and the closing attorney can tell you what their office uses.

Form 8288 and the 20-day filing

The Form 8288 instructions set the deadline: "A transferee must file Form 8288 and transmit the tax withheld to the IRS by the 20th day after the date of transfer."

Form 8288-A goes with it. The instructions say the buyer prepares a Form 8288-A for each person the tax was withheld from, attaches Copies A and B to Form 8288, and keeps Copy C. The IRS stamps Copy B and sends it to the seller, who attaches it to a U.S. income tax return to receive credit for the tax withheld.

A withholding certificate on Form 8288-B

A foreign seller whose actual tax will be lower than the withholding can apply to the IRS for a withholding certificate on Form 8288-B. One of the grounds on the form is a calculation showing the seller's maximum tax liability is less than the amount that would otherwise be withheld.

A pending application moves the 20-day clock above. The Form 8288 instructions say: "You must withhold even if an application for a withholding certificate is or has been submitted to the IRS on the date of transfer. However, you do not have to file Form 8288 and transmit the withholding until the 20th day after the day the IRS mails you a copy of the withholding certificate." Whether a seller should apply is a question for the seller's CPA or tax counsel.

Settling FIRPTA in the purchase contract, step by step

1. The question at the offer. The buyer's agent asks whether the seller is a U.S. person, and the answer goes to the closing attorney the day the contract is signed.
2. The seller's certification. If the seller is not a foreign person, please have the seller provide a signed certification of nonforeign status or a valid Form W-9, to your client or to a qualified substitute.
3. The amount realized. The cash price, the value of anything else your client transfers, and any loan your client assumes, added together, decide which row of the table applies.
4. The residence plans. If your client will live in the home, it is worth confirming the 50 percent test with them and their CPA, with the plans in writing in the closing file.
5. The withholding at closing. If withholding applies, the closing attorney holds back the right percentage and prepares Forms 8288 and 8288-A for the 20-day filing.
6. The seller's CPA. If the seller is applying for a withholding certificate, the application and the written notice to the buyer need to be in motion before the closing date.

The withholding changes how much cash reaches the seller. On your client's side, the closing costs your client is paying run on the same timeline.

Common mistakes with FIRPTA withholding

Leaving it until the title work. This is easiest to settle before the contract is signed, while the parties can still agree on the certificate and the timing.

Reading the seller's address as the answer. A foreign address on the contract does not by itself make the seller a foreign person, and a U.S. address does not rule it out.

Claiming the residence exception for a property your client will mostly rent out. The IRS says the tax may be collected from the buyer if the property is not in fact used as a residence.

An illustration, so the arithmetic is visible

Numbers below are made up to show the mechanism. They are not anyone's file.

Say the seller is a foreign person and gives no certification of nonforeign status. Three versions of the same purchase:

  A. $640,000 HOME, CLIENT WILL LIVE IN IT
  ------------------------------------------
  Amount realized                   $640,000
  Rate (residence, up to $1M)           10%
                                    --------
  Withheld and sent to the IRS       $64,000

  B. SAME HOME, AS AN INVESTMENT PROPERTY
  ------------------------------------------
  Amount realized                   $640,000
  Rate (general)                        15%
                                    --------
  Withheld and sent to the IRS       $96,000

  C. CONDO, $250,000 CASH + $70,000 ASSUMED
  ------------------------------------------
  Cash paid                         $250,000
  Loan assumed                       $70,000
                                    --------
  Amount realized                   $320,000
  Rate (residence, over $300,000)       10%
                                    --------
  Withheld and sent to the IRS       $32,000

In version C, the cash alone was under $300,000, and the assumed loan moved it into the 10 percent row. With a U.S. seller and a signed certification, all three would have been zero.

Lining up the rest of the purchase

The withholding comes out of what would otherwise be paid to the seller, and your client still has their own loan to choose. If your client's down payment is coming from accounts outside the country, using foreign funds for a down payment covers that side. If the seller is an estate rather than a person, buying a probate or estate sale home covers who can sign. Comparing two Loan Estimates side by side helps once the offers come in.

When your client is ready, you can price their purchase in Rate & Best Fit and choose the option that works best for them. If a foreign seller is in the picture, you are welcome to call me at (843) 765-0000 before the contract is final, and we can talk through the closing timeline.

Nothing here is tax or legal advice or a credit decision; the tax questions belong with your client's CPA or tax counsel, and the decision on any loan is the lender's.

Common questions

Does the buyer have to withhold FIRPTA tax when the seller is a foreign person?

In most cases, yes. The IRS says the buyer is usually the withholding agent and must find out whether the seller is a foreign person. If the seller is foreign and the buyer fails to withhold, the IRS says the buyer may be held liable for the tax.

What is the FIRPTA withholding rate in 2026?

The general rate is 15 percent of the amount realized, for sales since February 17, 2016. For a home the buyer will live in, it drops to zero or 10 percent. The residence thresholds are in the Form 8288 instructions (Rev. January 2026), stated in the table above.

What is the FIRPTA residence exception?

No withholding is required when individuals acquire the property for use as a residence and the amount realized is at or under the residence threshold in the Form 8288 instructions (Rev. January 2026), stated in the table above. Above it, up to the upper threshold, the rate is 10 percent. The buyer or a family member must have definite plans to live there at least 50 percent of the days the property is used in each of the first two 12-month periods after closing.

What document removes FIRPTA withholding?

A certification of nonforeign status from the seller, signed under penalties of perjury, with the seller's name, address and taxpayer identification number. A valid Form W-9 also works. The buyer keeps it for five years after the year of the sale.

When is Form 8288 due?

The buyer files Form 8288 and sends the withheld tax to the IRS by the 20th day after the date of transfer, with a Form 8288-A for each seller. If a withholding certificate application is pending at closing, the IRS lets the filing wait until the 20th day after it mails the certificate.

Does an assumed mortgage count toward the FIRPTA amount realized?

Yes. The IRS amount realized includes any debt the buyer assumes, along with the cash paid and the value of other property transferred, so an assumed loan can move a purchase into a higher withholding band.