FAQs

FIRPTA is the Foreign Investment in Real Property Tax Act. It requires buyers to withhold 15 percent of the sale price when purchasing US real property from a foreign person. It applies to DVC timeshare sales when the seller is a non-US citizen or non-resident alien. US citizens and green card holders are not subject to FIRPTA.

The standard FIRPTA withholding rate is 15 percent of the total sale price. On a 15,000 dollar DVC sale, 2,250 dollars would be withheld and sent to the IRS at closing. This withholding is a deposit against your actual tax liability, not a final tax. If the amount withheld exceeds what you actually owe, you receive a refund.

Yes. You can apply for a withholding certificate using IRS Form 8288-B before your closing date. If approved, the withholding is reduced to your estimated actual tax liability rather than the full 15 percent. The IRS has 90 days to process the application, so you should submit it as early as possible once you have a buyer and expected closing date.

The buyer or closing agent files Form 8288 and submits the withheld funds to the IRS within 20 days after closing. The IRS stamps the 8288-A and returns it to the seller. This process typically takes several weeks after closing. Contact your closing agent if you have not received it within 60 days of the sale date. You need this document to claim the withholding credit on your tax return.

File a US non-resident income tax return on Form 1040-NR for the year of the sale. Report your gain from the DVC sale, apply the withheld amount shown on Form 8288-A as a tax credit, and the IRS will refund any excess. Returns are due June 15 for the prior calendar year. Working with a US tax professional familiar with non-resident returns helps ensure accuracy and a faster refund.

FIRPTA applies to US real property interests regardless of which state the resort is in. Whether you are selling an Aulani contract in Hawaii, a Bay Lake Tower contract in Florida, or a contract at any other DVC resort, FIRPTA withholding applies the same way if you are a foreign person. The location of the resort does not change the federal withholding requirement.

Your adjusted basis is your original purchase price for the DVC contract plus acquisition costs you paid at the time of purchase such as title fees. Subtracting the adjusted basis from your sale price gives you your realized gain, which determines your actual tax liability. If your basis is close to or higher than the sale price, your gain is small or zero, and most or all of the 15 percent withheld will be refundable.

US citizens and permanent residents are completely exempt from FIRPTA. For foreign sellers, a sale price exemption exists when the total price is 300,000 dollars or less and the buyer uses it as a personal residence, but this rarely applies to DVC timeshare transactions. The practical option for reducing withholding is applying for a withholding certificate on Form 8288-B before closing.

Yes. If you sold your DVC contract for less than your adjusted basis, you had no gain and owe no US capital gains tax on the transaction. In that case, the entire 15 percent withheld is refundable. You still need to file Form 1040-NR to claim the refund, and you will need documentation of your original purchase price to establish that a loss occurred.

Yes. Aulani contracts are subject to both FIRPTA at 15 percent and HARPTA at 7.25 percent because Hawaii imposes its own withholding law on non-resident sellers. For a foreign national selling an Aulani contract, both amounts are withheld at closing for a combined total of 22.25 percent. The FIRPTA amount goes to the IRS and the HARPTA amount goes to the Hawaii Department of Taxation. Both are separately refundable through their respective processes.