Are you planning to sell a South Miami home or condo and wondering if FIRPTA will affect your bottom line? You are not alone. Cross‑border sales are common in Miami, and FIRPTA can surprise sellers and buyers if no one plans ahead. In this guide, you will learn when FIRPTA applies, how the standard 15 percent withholding works, the key exceptions, and the closing steps that keep your deal on track. Let’s dive in.
What FIRPTA is and why it matters
FIRPTA is the federal Foreign Investment in Real Property Tax Act. It requires a tax withholding when a foreign person sells a U.S. real property interest. The goal is simple. It helps the IRS collect tax on gains that a foreign seller might otherwise not report.
There is no separate Florida version of FIRPTA. Florida has no personal income tax. FIRPTA is a federal rule that applies to real estate anywhere in the U.S., including South Miami.
Who is a “foreign person” under FIRPTA
For FIRPTA, a foreign person is anyone who is not a U.S. person for tax purposes. That includes nonresident alien individuals and foreign corporations or partnerships. U.S. persons include U.S. citizens, U.S. resident aliens for tax purposes, and domestic entities.
What counts as a U.S. real property interest
A U.S. real property interest includes direct ownership of land, homes, and condos. It can also include certain interests in entities where the main asset is U.S. real property. In South Miami, common examples include the sale of a condo, townhouse, or single‑family home by a foreign owner.
When FIRPTA applies to a South Miami sale
FIRPTA applies when there is a disposition of a U.S. real property interest by a foreign person. A disposition is usually a sale, but it can also include exchanges or other transfers of interest.
A key point is how the amount is calculated. The withholding is based on the amount realized, which is generally the gross sales price, not just the gain.
Typical local scenarios
- A foreign individual sells a South Miami condo used for seasonal stays.
- A foreign corporation sells a Miami‑area investment property.
- An ownership interest in an entity that primarily holds U.S. real estate is transferred.
The standard 15 percent withholding
The typical FIRPTA withholding is 15 percent of the gross selling price. That number can be large, so plan for the cash‑flow impact early.
Who withholds and who is liable
The buyer, or another agreed withholding agent such as the title or escrow company, is responsible for collecting and remitting the funds. If required withholding does not occur, the buyer can be personally liable for the tax, plus possible interest and penalties. Most Florida closings rely on the title company to administer withholding, but the parties should confirm in writing who will handle it.
Timing and the basic forms
The withheld amount is transmitted to the IRS using Form 8288 and Form 8288‑A. Remittance is generally due shortly after closing, often cited as within 20 days of the transfer. The seller receives Form 8288‑A as proof the funds were sent to the IRS.
What happens after closing
The withheld funds are credited to the seller’s U.S. tax account. The seller then files a U.S. tax return for the year of sale, such as Form 1040‑NR for individuals, to report the sale and calculate the actual tax due. If the withholding is more than the final tax, the seller can seek a refund.
Exceptions that can reduce or avoid withholding
There are several paths to reduce or avoid the default 15 percent. Each one has specific requirements.
Affidavit of non‑foreign status
If the seller is a U.S. person for tax purposes, the seller can sign an affidavit of non‑foreign status under penalties of perjury and provide a U.S. taxpayer identification number. If the buyer or title agent reasonably relies on that affidavit and has no reason to believe it is false, no FIRPTA withholding is required. In Florida, title companies often request a completed W‑9, the signed affidavit, and backup identification before accepting non‑foreign status.
Residence exception for buyer‑occupants
If the buyer intends to use the property as a residence and the sale price is 300,000 dollars or less, withholding may not be required. The buyer typically signs a statement of intent to occupy. This exception is common in lower‑price residential sales but is less common in luxury transactions.
IRS withholding certificate
A foreign seller can apply to the IRS for a withholding certificate that authorizes reduced or zero withholding. The application includes support for the expected U.S. tax liability on the sale. While the request is pending, the buyer generally must withhold the full amount unless the IRS issues a certificate instructing otherwise. Processing can take weeks or months, so start early if you plan to use this option.
Practical steps for smooth South Miami closings
If you are a foreign seller
- Confirm your tax residency status early. If you are foreign for U.S. tax purposes, expect FIRPTA to apply unless an exception fits.
- Obtain a U.S. taxpayer identification number if you do not have one. If you need an ITIN, apply as early as possible because processing can take time.
- Ask your advisor to evaluate whether a withholding certificate could reduce the 15 percent. If your expected gain is modest or your basis is high, the certificate can improve cash flow at closing.
- Build the withholding amount into your net sheet. Do not expect the title company or buyer to advance those funds back to you.
If you are a buyer in a FIRPTA deal
- Confirm who will act as the withholding agent. In many Miami closings, the title company handles Forms 8288 and 8288‑A, but you should not assume.
- If the seller claims non‑foreign status, collect the signed affidavit and W‑9 and review for inconsistencies. If you have reason to know it is false, you cannot rely on it.
- If you plan to live in the home and the price is at or below 300,000 dollars, prepare the occupancy statement to support the residence exception.
- Calendar the remittance deadline after closing and confirm the filing package is complete.
Timeline planning that works locally
- 6 to 8 weeks before closing: If needed, start the ITIN and withholding certificate process. IRS review can take longer, so earlier is better.
- Contract to title order: Confirm FIRPTA status and who will withhold. Add language to the contract if needed to clarify roles.
- One week before closing: Verify final amounts and that the title company has the correct forms and instructions ready.
- After closing: Ensure Forms 8288 and 8288‑A are submitted on time and that the seller receives copies.
Common pitfalls to avoid in Miami
- Relying on a non‑foreign affidavit when facts raise red flags. Cross‑border parties are common in Miami, so buyers and title agents should stay vigilant.
- Learning about FIRPTA at the closing table. The 15 percent of gross can be a shock if you have not planned for it.
- Filing the withholding certificate or ITIN request too late. If the IRS has not issued a certificate by closing, withholding usually still happens, and you wait for a refund later.
- Overlooking buyer liability. If the buyer fails to withhold when required, the buyer can be pursued for the tax, interest, and penalties.
- Assuming entity structures make FIRPTA go away. Partnership, trust, or corporate sellers can involve complex rules. Get qualified advice.
Quick checklists you can use
Seller checklist
- Determine if you are a foreign seller for U.S. tax purposes.
- If foreign, plan for 15 percent withholding on the gross sale price.
- Consider an IRS withholding certificate if your expected tax is much lower than 15 percent of the price.
- Obtain or confirm your ITIN or other taxpayer ID.
- Coordinate with your title company on FIRPTA paperwork and timing.
- Keep Form 8288‑A for your records and tax filing.
Buyer checklist
- Ask for the seller’s non‑foreign affidavit and W‑9 if the seller claims U.S. status.
- If FIRPTA applies, confirm who will act as withholding agent.
- Prepare Forms 8288 and 8288‑A and plan for timely remittance.
- If eligible for the residence exception on a 300,000 dollar purchase or less, sign and keep the occupancy statement.
- Retain proof of withholding in your closing file.
Work with a South Miami advisor
FIRPTA can be straightforward with the right plan. Early confirmation of status, clear assignment of the withholding role, and on‑time paperwork keep your sale moving and protect everyone at the table. If your situation involves entities or complex ownership, involve experienced tax counsel.
When you are ready to sell or buy in South Miami, you deserve a team that understands cross‑border deals, title workflows, and luxury‑market expectations. Hablamos español and support clients across South Florida’s coastal neighborhoods with concierge guidance and clear communication. Connect with the Alex Miranda Group to review your goals and map out a smooth closing.
FAQs
What is FIRPTA in South Miami real estate?
- FIRPTA is a federal rule that requires tax withholding when a foreign person sells a U.S. real property interest, including homes and condos in South Miami.
How much is FIRPTA withholding on a sale?
- The standard withholding is 15 percent of the gross sales price, not the gain, unless an exception or IRS withholding certificate applies.
Who withholds and sends FIRPTA funds?
- The buyer or a designated withholding agent, often the title company, withholds at closing and sends funds to the IRS with Forms 8288 and 8288‑A.
Can I avoid FIRPTA withholding as a seller?
- You can avoid or reduce withholding if you are a U.S. person and provide a valid non‑foreign affidavit, if the buyer qualifies for the residence exception at 300,000 dollars or less, or if you obtain an IRS withholding certificate.
What if I am over‑withheld under FIRPTA?
- The withheld amount is credited to your U.S. tax account, and you can file a U.S. tax return to reconcile and request a refund if the withholding exceeds your actual tax.
How long does an IRS withholding certificate take?
- Processing can take weeks or months, so start early if you plan to use a certificate to reduce or eliminate the 15 percent withholding.
