407-344-1012 
January 31, 2026 
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FIRPTA explained in simple terms for foreign property owners selling real estate in the United States. If you are a non-U.S. resident or foreign investor, FIRPTA withholding tax could require up to 15% of your sales price to be withheld at closing.
In this video, we explain:
- What FIRPTA is and why it exists
- Who qualifies as a foreign seller
- How FIRPTA withholding works
- Common FIRPTA exemptions
- Real examples with numbers
- How to reduce or recover withheld taxes
This video is essential for foreign sellers, real estate investors, realtors, and closing agents involved in U.S. property transactions.
- Comment below if you are selling property as a foreigner
- Like if this helped you understand FIRPTA
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TRANSCRIPTION
If you’re a foreign investor selling US real estate, did you know the IRS might withhold up to 15% of the sales price? Not just the profit, the entire price. Stick around, because in this video, we’re breaking down exactly what FIRPTA is, why it exists, and how to avoid expensive mistakes. Welcome to the Freedom Group channel.
We’re a team of professionals made up of three companies serving our community for over 20 years in the areas of taxes, accounting, insurance, financial planning, and real estate. Whether you’re a new business owner or a seasoned investor, we’re here to help you navigate the complex world of finance with confidence. Let’s start with the basics.
FIRPTA stands for Foreign Investment in Real Property Tax Act. It’s a US tax law that was passed back in 1980. FIRPTA requires that when a foreign person sells US real estate, a portion of the gross sales price, not just the profit, is withheld and sent into the IRS.
Think of it like this. If a foreign investor sells a property for a million, up to $150,000 may be withheld right at closing. Yes, you heard that right.
Even if they only made $50,000 in profit, the IRS still withholds 15% of the sales price, not just the gain. So why was FIRPTA even created? Before 1980, foreign investors could sell US real estate and avoid paying taxes entirely. The IRS had no way to track the sale or enforce tax collection once the money left the country.
FIRPTA gave the IRS a way to guarantee tax compliance by collecting money up front through withholding. FIRPTA applies to foreign individuals, foreign corporations, and certain foreign trusts or partnerships. A foreign person is anyone who is not a US citizen, not a US green card holder, and does not meet the substantial presence test.
If you are a US buyer purchasing property from a foreign seller, you, your agent, or your closing attorney may be responsible for making sure the withholding happens. That’s why it’s critical to work with professionals who understand FIRPTA. The penalties for failing to comply can be severe.
Let’s clear up a few common myths. Myth number one, FIRPTA is a tax on the sale. Fact, it’s a withholding, not the final tax.
The foreign seller still files a US tax return and may get some of the money back. Myth number two, FIRPTA only applies if there’s a profit. The fact, FIRPTA applies no matter what, even if the property is sold at a loss.
Myth number three, only expensive properties are subject to FIRPTA. The fact, FIRPTA applies to most real estate sales by foreign persons regardless of the price, though exceptions and exemptions may apply. The good news is, yes, FIRPTA withholding can sometimes be reduced or eliminated altogether.
Here are a few examples. If the property is sold for under 300,000 and the buyer intends to live there, the withholding may be completely waived. A foreign seller can apply for a withholding certificate from the IRS to reduce or eliminate the amount, especially if they expect to owe less tax than the full 15% withhold, but timing is everything.
The application must be submitted before or at closing, and it can take months to process. That’s why we always recommend speaking with a tax professional early in the sales process. So why should business owners care? If you’re a foreign national investing in US real estate as part of your business strategy, maybe through rental income or property flips, FIRPTA will likely affect when you sell.
Even if you’re a US buyer, you may have withholding responsibilities if the seller is a foreigner. That’s a legal obligation, and it’s a big one. At Freedom Group, we help investors, agents, attorneys, and business owners navigate FIRPTA from start to finish, ensuring compliance and maximizing refunds when possible.
Need help with FIRPTA? Don’t wait until closing day. Schedule a consultation with one of our tax experts at Freedom Group. We’ll help you understand your options, apply for exceptions if you qualify, and make sure you’re in full compliance with IRS rules.
Click the link in the description to get started today. And don’t forget to like, subscribe, and share this video with anyone investing in US real estate. You could save them thousands.
FIRPTA can be complicated, but with the right guidance, it doesn’t have to be stressful. We hope this video gave you clarity and confidence.
Summary
If you’re a foreign investor selling real estate in the United States, the IRS may require withholding up to 15% of the total sales price — not just your profit. This happens under a federal law called FIRPTA (Foreign Investment in Real Property Tax Act), created to ensure tax compliance when foreign sellers dispose of U.S. property.
FIRPTA applies to foreign individuals, corporations, and certain foreign trusts or partnerships. A “foreign person” generally means anyone who is not a U.S. citizen, does not hold a green card, and does not meet the substantial presence test.
Here’s what many sellers don’t realize: FIRPTA is not a tax — it’s a withholding. After the sale, the foreign seller must file a U.S. tax return, and they may receive a refund if the actual tax owed is less than the amount withheld.
For example, if a foreign investor sells property for $1,000,000, up to $150,000 may be withheld at closing — even if their profit was far less.
FIRPTA applies regardless of whether the sale resulted in a gain or a loss.
Why FIRPTA Exists
Before FIRPTA was enacted in 1980, foreign investors could sell U.S. property and leave the country without paying taxes. The IRS had no way to enforce collection. FIRPTA solved this by requiring withholding at closing, ensuring the government receives funds upfront.
Important FIRPTA Exceptions
Some transactions qualify for reduced or eliminated withholding:
- If the property sells for under $300,000 and the buyer intends to live there, withholding may be waived.
- Foreign sellers can apply for a withholding certificate from the IRS to reduce or eliminate the 15% amount if they expect to owe less tax.
Timing matters. These applications must be submitted before or at closing and often take months to process.
Buyer Responsibility Matters
If you’re a U.S. buyer purchasing property from a foreign seller, you — along with your agent or closing attorney — may be legally responsible for ensuring FIRPTA withholding is handled correctly. Failure to comply can result in serious penalties.
At FREEDOMTAX ACCOUNTING, we help foreign investors, buyers, agents, and attorneys navigate FIRPTA from start to finish — ensuring compliance while helping sellers recover excess withholding whenever possible.
Frequently Asked Questions
What is FIRPTA?
FIRPTA stands for Foreign Investment in Real Property Tax Act. It requires withholding on U.S. real estate sales by foreign sellers.
How much does FIRPTA withhold?
Up to 15% of the gross sales price.
Is FIRPTA a tax?
No. It’s a withholding. The seller files a U.S. tax return later and may receive a refund.
Does FIRPTA apply even if there’s no profit?
Yes. Withholding applies regardless of gain or loss.
Are there exceptions?
Yes. Certain owner-occupied purchases under $300,000 and IRS withholding certificates may reduce or eliminate withholding.
Who ensures FIRPTA compliance?
The buyer, real estate agent, or closing attorney may be legally responsible.
Internal Resources:
- Non-Resident Tax Services
https://freedomtaxaccounting.com/non-resident-tax-services/ - Real Estate Tax Planning
https://freedomtaxaccounting.com/real-estate-tax-planning/ - Tax Planning Services
https://freedomtaxaccounting.com/tax-planning-services/
External Resources:
- IRS – Foreign Sellers of U.S. Real Property (FIRPTA)
https://www.irs.gov/individuals/international-taxpayers/foreign-sellers-of-us-real-property-interests-firpta - Investopedia – FIRPTA Explained
https://www.investopedia.com/terms/f/firpta.asp - Nolo – Selling U.S. Property as a Foreigner
https://www.nolo.com/legal-encyclopedia/selling-us-real-estate-foreigners-firpta.html
