Selling DVC Jointly: FIRPTA for Married Couples
DVC contracts are often owned by two people (a married couple, partners, siblings, or friends who purchased together. FIRPTA rules apply to each owner based on their share of the sale proceeds and their individual tax status. Here is how joint ownership affects the withholding and refund process.
How FIRPTA Withholding Works for Joint Owners
When a jointly owned DVC contract is sold, the FIRPTA withholding is based on the total sale price, not each owner's share individually. The closing agent withholds 15% of the gross sale price and remits it to the IRS as a single payment via Form 8288. The split between owners is a matter for the owners' individual tax returns, not for the withholding calculation at closing.
Each Owner Needs Their Own ITIN
Every non-US owner named on the DVC deed needs their own US taxpayer identification number to file a tax return claiming their portion of the refund. If two unrelated parties own the contract, each files their own Form 1040-NR for their share. If a married couple owns it together, they may have options (see below).
If one owner already has an ITIN from a prior filing and the other does not, the second owner must apply for an ITIN before their return can be filed. Plan this in advance) ITIN applications take 7-11 weeks.
What Form 8288-A Shows
The closing agent issues a single Form 8288-A for the transaction. It shows the total withholding amount. For joint owners, the total withholding is apportioned by ownership percentage. If each owner holds 50%, each claims 50% of the withholding as a credit on their individual return.
Ask your closing agent whether they issue separate Form 8288-As for each owner or a single combined one. Some agents split it; others do not. If you receive a combined 8288-A showing the full withholding, your share is simply your ownership percentage multiplied by the total shown.
Married Couples: Joint vs Separate Filing
If both spouses are non-resident aliens in the same tax year, they may elect to file a joint Form 1040-NR (using the "Married Filing Jointly" status that non-resident alien couples can elect under IRC Section 6013(g). Both spouses must agree to be taxed on their worldwide income (not just US-source income) for the year. This election is irrevocable once made.
Alternatively, each spouse can file a separate Form 1040-NR reporting their own 50% share of the DVC gain. This is simpler and avoids the worldwide income disclosure that comes with the joint election. For most DVC sellers whose only US income is the DVC sale, separate filing is often the better choice.
If one spouse is a US citizen or US resident and the other is non-resident, the situation is more complex. Consult a tax professional familiar with US-resident spouse elections under Section 6013(g) and (h).
Unrelated Co-Owners
If two unrelated non-residents co-own a DVC contract, each files their own Form 1040-NR for their share of the gain and claims their proportional share of the withholding. There is no joint filing option for unrelated co-owners. Confirm the ownership percentage from your original deed) this determines how the gain and withholding are split.
One US Owner and One Non-US Owner
If one co-owner is a US person (citizen, Green Card holder, or US tax resident) and the other is a foreign person, FIRPTA applies only to the foreign person's share of the sale. The withholding is calculated on the foreign owner's proportionate share of the sale price, not the total.
Example: Two co-owners, each with 50% ownership. Sale price is $30,000. One is a US citizen (no FIRPTA); the other is a UK national (FIRPTA applies). FIRPTA withholding = 15% x $15,000 (the foreign owner's 50%) = $2,250 (not 15% of the full $30,000.
Closing agents handle this split by requiring the US owner to provide a Non-Foreign Affidavit. The withholding is then calculated only on the foreign owner's share.
Practical Tips for Joint DVC Sales
- Confirm both owners' ITIN status well before closing
- Determine the filing approach (joint vs separate) before year-end with a tax professional
- Clarify with the closing agent whether they will issue separate or combined Forms 8288-A
- Keep both owners' original DVC purchase documents to prove cost basis
- Coordinate with your tax professional to make sure both owners file returns for the same tax year
Frequently Asked Questions
Do both owners of a jointly held DVC contract need to file a US tax return?
Yes, each non-US owner must file their own Form 1040-NR to claim their share of the FIRPTA withholding. The IRS does not automatically split and refund the withholding) each owner must file to receive their portion.
How is the FIRPTA withholding split between co-owners?
In proportion to ownership percentages. If each owner holds 50%, each claims 50% of the total withholding as a credit on their individual return. Check your deed for the exact ownership percentage.
What if only one co-owner is a foreign person?
FIRPTA withholding is calculated only on the foreign co-owner's share of the sale price. The US co-owner provides a Non-Foreign Affidavit; withholding applies only to the non-US portion.
Can married non-resident alien co-owners file a joint 1040-NR?
Yes, by electing under IRC Section 6013(g) (but both spouses must agree to be taxed on worldwide income for the year. Many couples prefer separate filing to avoid this disclosure. Consult a tax professional on which is more advantageous for your situation.