What is FIRPTA? A Beginner's Guide for International Property Sellers

FIRPTA — the Foreign Investment in Real Property Tax Act — is a US federal law that requires buyers or their closing agents to withhold a percentage of the sale price whenever a foreign person sells US real property. If you are not a US citizen or permanent resident and you are selling a property located in the United States (including a DVC timeshare contract), FIRPTA applies to your sale.

Why Does FIRPTA Exist?

Congress passed FIRPTA in 1980 because before that law, foreign sellers of US real estate could collect their proceeds, return home, and the IRS had limited ability to collect capital gains tax from them. FIRPTA solved this by requiring the tax to be withheld at closing before the money ever leaves the US.

The Standard Rate Is 15%

For most sales, the withholding is 15% of the gross sale price. On a $25,000 DVC contract sale, that is $3,750 withheld and sent to the IRS. The closing agent handles the mechanics: they calculate the amount, deduct it from your proceeds, and file Form 8288 with the IRS within 20 days of closing.

It Is a Deposit, Not a Final Tax

The 15% is withheld on the total sale price. Your actual tax is based on your capital gain — the difference between what you sold for and what you originally paid. Since the gain is always less than the total sale price, the withholding almost always exceeds your real tax liability. You file a US tax return (Form 1040-NR) to calculate your actual tax and claim a refund of the difference.

Who Is Considered Foreign for FIRPTA Purposes?

Anyone who is not a US citizen, US permanent resident (green card holder), or US tax resident. If you are a citizen of another country living in your home country, FIRPTA applies to your DVC sale regardless of which country you are from or whether a tax treaty exists between your country and the US.

To learn how to get your FIRPTA refund step by step, see our complete FIRPTA guide for DVC sellers.