Florida continues to shine as one of the most sought-after real estate markets in the world and it’s easy to see why. ☀️ From luxury vacation homes to short-term rental investments near Disney, international buyers have long favored the Sunshine State as their top U.S. destination for property ownership.

According to the National Association of REALTORS®, Florida accounted for 25% of all foreign real estate purchases in the U.S., totaling nearly $15 billion between April 2021 and March 2022  more than California and Texas combined.

But when it comes time to sell, many international property owners are surprised to learn about something called FIRPTA, a U.S. tax law that can significantly impact their proceeds if not handled correctly.

Let’s break down what you need to know.

🇺🇸 What Is FIRPTA?

The Foreign Investment in Real Property Tax Act (FIRPTA) is a federal tax law that applies when a foreign person sells U.S. real estate.
When this happens, the buyer is required to withhold a portion of the sales price (usually 10% to 15%) and send it to the IRS within 20 days after closing.

This applies regardless of whether the buyer is American or foreign. Even reorganizing ownership structures,  such as transferring property into a company, trust, or adding family members to the deed,  can trigger FIRPTA in certain situations.

⚠️ Common Misconceptions About FIRPTA

Many foreign investors assume they can easily avoid FIRPTA, but this is rarely the case. Here are a few of the most common misunderstandings:

1. “I own my property through an LLC, so I’m exempt.”
   ❌ Not necessarily. Unless your LLC has elected to be taxed as a C Corporation using IRS Form 8832, the IRS will “look through” the LLC and still treat you, the individual, as the property owner.

2. “If I sell to another foreign buyer, FIRPTA doesn’t apply.”
   ❌ FIRPTA is based on the seller’s residency status, not the buyer’s. It applies whether the buyer is U.S. or foreign.

3. “I didn’t tell the buyer I’m foreign, so I’m fine.”
   ❌ Incorrect. Hiding or refusing to declare your foreign status can lead to serious penalties. The buyer is legally responsible for withholding, and if it’s not done correctly, both parties can face IRS issues.

4. “My property sold at a loss, so FIRPTA doesn’t apply.”
   ❌ FIRPTA is a gross withholding tax based on the sale price, not the profit. Even if you don’t make a gain, the buyer must still withhold unless you’ve obtained an approved IRS Withholding Certificate.

💡 How to Avoid (or Reduce) FIRPTA Withholding

The good news is, FIRPTA can often be reduced or even avoided entirely with proper planning and documentation.

One of the most effective strategies is to apply for an IRS Withholding Certificate (Form 8288-B) before closing.
This form allows the seller to show the IRS that the actual tax owed on the gain is lower than the flat withholding amount, or that there is no taxable gain at all.

When approved, the IRS notifies the buyer that they can withhold less or none at all, saving the seller from months of waiting for a refund.

For example:
If you’re selling a vacation home purchased years ago and your gain is minimal, the 20% capital gains tax may be much lower than the 15% FIRPTA withholding on the gross sale price. Filing Form 8288-B before closing can prevent that over-withholding.

⏰ Timing is crucial, the form must be submitted to the IRS and shared with the buyer before the closing date. If missed, the buyer is obligated to withhold the full amount.

🧭 Final Thoughts

Florida’s global appeal isn’t slowing down, but for international sellers, understanding FIRPTA can make the difference between a smooth closing and months of delayed funds.

If you’re a foreign investor planning to sell your Florida property, it’s essential to:
✅ Work with a real estate broker experienced with FIRPTA transactions
✅ Consult a FIRPTA tax advisor or CPA
✅ File IRS Form 8288-B early to minimize over-withholding

Proper guidance can help you avoid costly mistakes and keep more of your hard-earned equity where it belongs in your pocket. 💰

Thinking of selling your Florida vacation home or investment property?
Let’s make your global transaction seamless. 🌎
📞 321-333-1338
📧 [email protected]
🌐 www.vacayreflorida.com