Thomas Druck PA — Miami real estate
FAQ · ABSENTEE & INTERNATIONAL CONDO SELLERS

FIRPTA Explained for Non-US Condo Sellers in Miami

If you live outside the United States and you own a Miami condo you’re planning to sell, there is one US tax rule you cannot ignore: FIRPTA. It is the single biggest source of confusion, cash-flow surprise, and bad advice that lands on absentee sellers’ desks. This article gives you the straight answer — what FIRPTA is, what it costs, when it applies, how to legally reduce or recover the withholding, and what to put in motion before you list. It is written specifically for foreign owners of Miami condos, with a focus on DACH-region (Germany, Austria, Switzerland) sellers because that is who I work with most.

Quick answer (the 90-second version)

FIRPTA is a US federal tax law (1980) that requires the buyer of US real estate from a non-US seller to withhold a percentage of the gross sales price at closing and remit it to the IRS. It is not a separate tax — it is an advance payment against the seller’s actual US tax liability on the gain.

  • Default withholding rate: 15% of the gross sales price.
  • Reduced rate: 10% if the buyer will occupy the property as a personal residence AND the price is between USD 300,001 and USD 1,000,000.
  • Exemption: 0% if the buyer will occupy the property as a personal residence AND the price is USD 300,000 or less.
  • Reduction tool: File IRS Form 8288-B before closing to ask the IRS to limit withholding to the expected actual tax owed on the gain. Done correctly, this can drop the withholding by tens or hundreds of thousands of dollars.
  • Recovery tool: File a US non-resident tax return (Form 1040-NR) after closing to reconcile and claim any refund.
 

If you stop reading here, the one thing to internalize: 15% of gross sale price is withheld at closing, not 15% of profit. On a USD 800,000 sale that is USD 120,000 going to the IRS the day you close — even if your actual gain (and therefore actual tax) is far less. Planning this before you list is the entire game.

1. What does FIRPTA stand for, and why does it exist?

FIRPTA is the Foreign Investment in Real Property Tax Act, enacted in 1980. Before FIRPTA, foreign owners of US real estate could sell, take their proceeds home, and disappear from the IRS’s reach. The act fixed that by making the buyer legally responsible for withholding a portion of the sales price and sending it to the IRS as a deposit against the seller’s eventual US tax bill.

The mechanism is blunt: the IRS does not try to calculate your gain at closing. They take a percentage of the gross price, hold it, and reconcile later when you file a return. The reconciliation is where overpayments are returned.

2. Who counts as a "foreign person" for FIRPTA?

A “foreign person” for FIRPTA purposes is anyone who is not a US citizen, US permanent resident (green-card holder), or US tax resident under the substantial presence test. That includes:
  • German, Austrian, Swiss citizens who own a Miami condo as an individual.
  • Non-US LLCs, GmbHs, and other foreign entities that hold US real estate.
  • US owners who moved abroad and gave up their US tax residency (rare but it happens — confirm with a CPA).
A US LLC owned by a foreign person is more nuanced — single-member disregarded LLCs are typically treated as the foreign owner for FIRPTA. Multi-member LLCs and corporations have their own rules. This is exactly the kind of structure question that should go to a CPA before you list.

3. What is the FIRPTA withholding rate on a Miami condo sale?

There are three tiers, and they are based on gross sales price, not gain:
Sales price Buyer occupies as residence? Withholding rate
USD 300,000 or less Yes 0% (exempt)
USD 300,001 – USD 1,000,000 Yes 10%
Over USD 1,000,000 Yes 15%
Any price No (investor, second home, etc.) 15%

“Occupies as a residence” has a specific IRS definition — the buyer (or a family member) must intend to live in the property at least 50% of the time it is occupied during each of the first two 12-month periods after closing. The buyer signs an affidavit attesting to this. If the buyer changes plans later, that is the buyer’s problem, not the seller’s.

Most Miami condo sales in the absentee-seller niche land in the 15% bracket — either because the price exceeds USD 1M, or because the buyer is also an investor.

4. Is FIRPTA a tax, or is it withholding?

It is withholding, not a tax. This distinction matters.

The actual US tax you owe on the sale is calculated on your gain, not your gross sale price. Gain is, roughly, sales price minus original cost basis minus qualified improvements minus selling costs. The federal long-term capital gains rate for non-residents on real estate is typically 15% or 20%, plus potentially a 3.8% net investment income tax depending on circumstances.

Worked example:

  • Sales price: USD 800,000
  • Original purchase price (2014): USD 450,000
  • Documented improvements: USD 50,000
  • Selling costs (commission, closing): USD 60,000
  • Gain: USD 240,000
  • Actual federal tax (assume 15% LTCG): USD 36,000
  • FIRPTA withheld at closing (15% of gross): USD 120,000
  • Refund owed to seller after filing 1040-NR: USD 84,000

 

That USD 84,000 is your money, but the IRS will sit on it for 6–18 months unless you act before closing to reduce the withholding. Which brings us to the most useful tool in this whole framework.

5. Can the FIRPTA withholding be reduced before closing? (Form 8288-B)

Yes — and most absentee sellers should pursue this.

Form 8288-B is the “Application for Withholding Certificate.” You (or your CPA) file it with the IRS before closing, showing your expected actual tax on the gain. If the IRS approves it, withholding at closing is limited to that expected amount instead of the default 15% of gross.

Using the example above: instead of USD 120,000 sitting at the IRS for a year, the closing agent withholds approximately USD 36,000 and you walk away with the other USD 84,000 in your wire.

The mechanics:

  • Timing: File Form 8288-B as early as possible — ideally as soon as you are under contract, sometimes earlier with an estimate.
  • Effect at closing: If the IRS hasn’t responded by closing, the closing agent must still withhold the full 15% — but they hold it in escrow rather than sending it to the IRS, waiting for the IRS’s certificate. Once the certificate is issued, the excess is released to you. If the certificate is denied or never arrives, the funds go to the IRS at the standard rate.
  • Realistic timeline: Plan on 90 days for an IRS response. File early.
 

This is one of the most leveraged actions an absentee seller can take. The cost of having a CPA file Form 8288-B is small relative to the cash-flow improvement.

6. Do I need a US tax ID (ITIN) to sell?

Yes. The IRS requires both seller and buyer to have a US taxpayer identification number on the FIRPTA paperwork. Most foreign sellers do not already have one.

For individuals, you apply for an ITIN (Individual Taxpayer Identification Number) using IRS Form W-7. The application must be accompanied by either original identity documents (passport) or copies certified by an IRS-authorized Certified Acceptance Agent (CAA). DACH-region sellers should not mail their original passport to the IRS — work through a CAA who can certify the passport locally or in the US.

Get the ITIN process started before you list. ITINs can take 8–12 weeks to issue, and closings have collapsed because the seller didn’t have one in hand. Some closings can use a pending ITIN application (W-7 attached to the withholding paperwork) — your CPA will know the current IRS practice.

7. Who actually does the withholding — me, the buyer, or the title company?

Legally, the buyer is the withholding agent and personally liable to the IRS for FIRPTA compliance. Practically, this is never how it plays out. The closing/title agent — sometimes the buyer’s attorney — handles the entire mechanism on the buyer’s behalf at closing:

  1. Buyer’s funds come into escrow at closing.
  2. Closing agent disburses sales proceeds, minus the FIRPTA withholding amount.
  3. Within 20 days of closing, the closing agent transmits Forms 8288 and 8288-A to the IRS along with the withheld funds.
  4. The seller receives a stamped copy of Form 8288-A as their receipt — keep this safe. It is the proof you’ll attach to your 1040-NR.
 

If the closing is being run by an inexperienced agent (not specialized in FIRPTA transactions), errors happen. In Miami this is uncommon — most closing agents in this market handle FIRPTA routinely — but it is worth confirming early in the contract phase. I steer my absentee clients toward closing agents who have done dozens of these.

8. How do I get the rest of my money back after closing?

By filing a US non-resident income tax return (Form 1040-NR) for the year of the sale.

The return calculates your actual US tax on the gain. The FIRPTA withholding (shown on Form 8288-A) is credited against that tax. If withholding exceeds tax owed, the IRS refunds the difference.

Practical notes:

  • The return is for the calendar year of closing. If you close in March 2027, you’ll file the 1040-NR in spring/summer 2028.
  • Refunds typically arrive 6–12 months after filing. The IRS is slower with non-resident returns than domestic ones.
  • An “early refund” path exists in some circumstances via Form 843, but it is the exception, not the rule.
 

Front-loading via Form 8288-B (Question 5) is almost always a better strategy than waiting for the refund.

9. How does FIRPTA interact with the US–Germany tax treaty?

Real property is the one place where international tax treaties typically don’t reduce US source taxation. Under most US treaties — including the US–Germany treaty — gains from the sale of US real estate are taxable in the US under domestic US rules. FIRPTA applies in full. Where the treaty does help is on the German side: Germany generally credits the US tax paid against your German tax liability on the same gain via the Anrechnungsverfahren — so you don’t pay both fully. Coordinating this is the job of a German tax advisor (Steuerberater) familiar with US-source income, working alongside the US CPA. A few practical DACH-specific points:
  • The sale must be declared in your German tax return for the year of closing.
  • If the condo was held in a German GmbH or other entity, the structure of the sale and the credit mechanism change — get the advice before listing.
  • Currency-conversion timing on the gain calculation (USD vs. EUR cost basis) can shift the German-side tax meaningfully. A good Steuerberater will work this carefully.

10. What about Florida state tax — is there extra withholding?

No. Florida has no state income tax on individuals, and there is no Florida state FIRPTA analog. The 15% federal withholding is the only US withholding on the sale. (If you also own property in another US state — say a New York or California condo — that state may impose its own non-resident withholding on top of FIRPTA. Florida does not.)

11. What's the timeline for an absentee seller to plan for FIRPTA?

Working backward from a target closing date, here is the minimum runway I recommend for an absentee seller:

  • 6+ months before closing: Apply for ITIN (Form W-7) if you don’t already have one. Engage a US CPA who handles international sellers.
  • 3–4 months before closing: Once under contract, have CPA prepare and file Form 8288-B to reduce withholding. Confirm closing agent is FIRPTA-experienced.
  • At closing: Closing agent withholds correct amount, issues stamped Form 8288-A. Keep all originals.
  • Year of closing — German return: Declare sale, coordinate US/DE credit.
  • April–June of year following closing: File US Form 1040-NR for refund (if any).
 

The single most expensive mistake I see is sellers who only learn about FIRPTA after signing a contract. By then it’s too late to file Form 8288-B in time. They close, lose 15% of gross to the IRS for 18 months, and discover the rest only when their CPA mentions it. Don’t be that seller.

12. How does this fit into Tom's Net + Risk Review?

This is exactly the kind of question my free 30-minute Net + Risk Review is built to answer. Before you commit to a listing — before you even decide whether selling makes sense — I walk you through:

  • What your Miami condo would realistically sell for in today’s market.
  • The full net-proceeds calculation, including FIRPTA withholding (using your actual cost basis if you have it).
  • The Form 8288-B reduction estimate, with referral to a CPA who can file it.
  • Assessment exposure, SB 4-D milestone status, and HOA-document red flags.
  • A realistic timeline that accounts for ITIN, CPA work, and remote-closing logistics.
 

For non-US sellers, this is the cheapest insurance against the FIRPTA cash-flow surprise.

Curious what you'd actually net after FIRPTA?

Final disclaimer: Nothing in this article is tax or legal advice. FIRPTA rules change (the residence-exemption thresholds have moved historically), and individual situations differ. Anyone selling US real estate as a non-US person must engage a US CPA with non-resident experience. I’m a Florida real estate broker — I will hand off to a CPA when the situation calls for it, which on every absentee-seller deal, it does.

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