What Is FIRPTA?
The Foreign Investment in Real Property Tax Act is a US federal tax law taxing foreign persons on dispositions of US real property interests.
Also known as: FIRPTA, FIRPTA Withholding.
How Foreign Investment in Real Property Tax Act (FIRPTA) works
The Foreign Investment in Real Property Tax Act applies when a foreign person, such as a non-resident alien or foreign corporation, sells or otherwise disposes of a United States real property interest, and treats the gain as taxable in the United States while requiring the buyer to withhold part of the amount realised at closing. According to the IRS, the withholding rate is generally 15 percent, the buyer usually acts as withholding agent and reports on Forms 8288 and 8288-A, and a residence exception applies where the amount realised does not exceed 300,000 dollars. The seller then generally files a return crediting the withheld amount.
Foreign Investment in Real Property Tax Act (FIRPTA) vs Withholding Tax
Unlike a final Withholding Tax on dividends or interest, FIRPTA withholding is generally a prepayment credited against the seller's final United States tax on the gain.
Example
Illustrative example: A citizen of Country A who moved away from the United States years ago sells a United States condominium. The buyer generally withholds 15 percent of the amount realised (illustrative, IRS rate) and remits the withholding to the IRS; the seller later files a non-resident return reporting the actual gain.
Common misconception
Myth: FIRPTA withholding is the final tax on the sale of United States property by a foreigner.
Reality: The Foreign Investment in Real Property Tax Act withholding is generally a prepayment, and the seller's final United States tax is determined on a return filed after the sale.
Frequently asked questions
Who pays FIRPTA withholding?
The Foreign Investment in Real Property Tax Act places the withholding duty on the buyer, or transferee, in most cases, who withholds from the amount realised and remits to the IRS with Forms 8288 and 8288-A.
Is FIRPTA a tax or a withholding?
The Foreign Investment in Real Property Tax Act both makes gains on United States real property taxable for foreign persons and imposes withholding at sale, and the withholding is generally credited against the final tax computed on the seller's return.
Related terms
- Withholding Tax — Withholding mechanism often confused with FIRPTA's final tax
- Non-Resident Alien — Typical seller subject to FIRPTA
- Immovable Property — Treaty concept covering real property gains
- Withholding Agent — Buyer role under FIRPTA withholding
Related guides
- Tax treaties and international taxation — Treaty treatment of real property gains
Sources
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
