FIRPTA Withholding Rates Explained: 15% vs 10% — Which Applies to You?

The standard FIRPTA withholding rate is 15% of the gross sale price. But you may have heard that a 10% rate exists. Here is exactly when each rate applies and which one you will face on your DVC sale.

The 15% Rate (Standard)

Effective February 2016, the standard FIRPTA withholding rate for most sales is 15% of the gross sale price. This is what applies to the vast majority of DVC resale transactions. On a $25,000 sale, the closing agent withholds $3,750.

The 10% Rate (Limited Residence Exception)

A reduced 10% rate applies when two conditions are both met: the sale price is $1,000,000 or less, and the buyer intends to use the property as a personal residence. For most DVC transactions, the sale price easily qualifies under $1,000,000. The problem is the personal residence requirement.

The IRS requires the buyer to furnish a written statement certifying that they intend to use the property as a personal residence under Section 121 standards — meaning they plan to live there as their primary home. A DVC timeshare is a vacation property. Buyers purchase DVC to use vacation points at Disney resorts. Nobody moves into the BoardWalk Inn permanently. Most reputable DVC closing agents apply the standard 15% rate because the residence exception is a stretch that could expose the closing agent to liability if the IRS disagrees.

Zero Withholding

No withholding applies if the seller certifies they are a US person (citizen or resident), or if the IRS issues a withholding certificate (via Form 8288-B) reducing the amount to zero because the estimated actual tax is zero (common when selling at a loss).

What This Means for Your DVC Sale

Plan on 15%. If you feel strongly that the 10% rate should apply to your situation, discuss it with your closing agent and a tax professional before closing — not on closing day. The closing agent will not change the withholding rate without proper authorization.