FIRPTA Basics for Broward Real Estate

Buying or selling in Broward Estates and hearing the word FIRPTA at every turn? You are not alone. International ownership is common in Broward County, and FIRPTA often shows up at the closing table. In this guide, you will learn what FIRPTA is, how the withholding works, the key deadlines, and how to avoid last‑minute surprises. Let’s dive in.

What is FIRPTA?

FIRPTA is the Foreign Investment in Real Property Tax Act. It requires tax withholding when a foreign person sells a U.S. real property interest. Foreign persons include nonresident individuals, foreign corporations, partnerships, trusts, and estates.

The rule applies to land, homes, condos, and similar U.S. real property interests. In Broward County, buyers and closing agents often serve as the withholding agent. If withholding is required and not handled correctly, the IRS can hold the buyer or agent liable.

Why it matters in Broward Estates

Broward Estates and greater Lauderhill see steady investor activity. That means you may have an international seller or buyer in your deal. FIRPTA planning affects cash needed at closing, how much is sent to the IRS, and the documents each side must prepare.

Florida does not have a state individual income tax, so there is no separate state FIRPTA withholding. Documentary stamp taxes and local recording fees still apply at closing and are separate from FIRPTA.

Withholding rates and thresholds

FIRPTA withholding is an advance payment of U.S. tax based on the sale price. It is not the seller’s final tax.

• General rule: 15 percent of the amount realized is withheld.
• Residential use exception when the buyer will use the property as a residence:
  • $300,000 or less purchase price: 0 percent withholding.
  • More than $300,000 up to $1,000,000: 10 percent withholding may apply.

These residential rules apply only if the buyer intends to use the home as a residence and the price fits the thresholds. Withholding is calculated on gross proceeds, not on the seller’s net gain.

Who withholds and the 20‑day deadline

The buyer is usually the withholding agent. In Florida practice, the title or escrow company often manages the paperwork and remittance on the buyer’s behalf.

• Collect the correct withholding at closing.
• File IRS Form 8288 and send the funds to the IRS within 20 calendar days after the transfer.
• Provide the seller with Form 8288‑A, which shows the amount withheld.

Missing the 20‑day window can trigger penalties. Confirm early who will serve as the withholding agent and how the forms and payments will be handled.

How to reduce or avoid withholding

There are several common paths to lower or eliminate withholding when appropriate.

Non‑foreign affidavit

If the seller certifies in writing that they are not a foreign person, and the buyer has no reason to think otherwise, withholding is generally not required. Title companies typically request a signed affidavit and identification.

Residential‑use exception

If the buyer will use the property as a residence, the $300,000 and $1,000,000 thresholds can reduce or remove withholding. Document the buyer’s intended use and price level in the file to support the exception.

IRS withholding certificate (Form 8288‑B)

If the standard withholding would exceed the seller’s actual tax, the seller can apply for a withholding certificate. The IRS may reduce or eliminate the amount to be withheld. Processing can take weeks to a few months, so many closings use an escrow hold while the application is pending.

Documents to prepare for closing

Preparation keeps a Broward closing smooth. Here is what each side should gather.

For foreign sellers

• Passport and any U.S. visa or green card details.
• U.S. tax identification number, if available (ITIN or SSN).
• Basis and closing cost records if applying for a withholding certificate.
• Decision on whether to file Form 8288‑B and any required support.

For buyers and withholding agents

• Confirm who will serve as withholding agent and how funds and forms will be submitted.
• Collect the seller’s non‑foreign affidavit or, if foreign, the needed information for filing.
• Include clear escrow language in the contract if a certificate is pending.
• Reserve sufficient funds for withholding or escrow.

Timeline planning for Broward Estates deals

Good timelines protect both sides.

• Standard remittance: The buyer or closing agent must send withheld funds and file Form 8288 within 20 days after the transfer.
• Withholding certificate: Start 6 to 10 weeks in advance when possible. Build in escrow language if the certificate will not arrive before closing.
• ITIN needs: Sellers who need an ITIN should allow extra time to obtain one to file a return or claim a refund.

Florida closing costs vs FIRPTA

Florida’s documentary stamp taxes and recording fees are separate from FIRPTA withholding. Your Broward County title company will calculate these charges. Confirm who pays what in the contract and review the settlement statement carefully.

After closing: refunds and filings

Withholding is not the final tax. The seller reports the sale on the appropriate U.S. income tax return and claims the withheld amount as a credit.

• Individuals use Form 1040‑NR.
• Foreign corporations use Form 1120‑F.

If the actual tax is less than the amount withheld, the seller can receive a refund after filing. Keep Form 8288‑A and closing documents to support the return.

Common pitfalls to avoid

• Assuming FIRPTA does not apply without verifying seller status.
• Missing the 20‑day IRS remittance deadline.
• Relying on the residential exception without proper documentation of intended use.
• Waiting too long to apply for a withholding certificate.
• Skipping escrow planning when a certificate decision is pending.

Quick FIRPTA checklist

• Identify if the seller is a foreign person early in the process.
• Confirm who will act as the withholding agent.
• Verify the purchase price and intended use for the residential thresholds.
• If needed, prepare Form 8288‑B and plan for escrow while pending.
• Meet the 20‑day deadline to file Form 8288 and remit funds.
• Sellers file the proper U.S. tax return to finalize tax and claim any refund.

When you plan ahead, FIRPTA becomes a straightforward checklist instead of a closing hurdle. If you are navigating a Broward Estates or Lauderhill transaction, you deserve clear steps, firm timelines, and a team that understands cross‑border details. For guidance tailored to your goals, connect with Chuck Levine.

FAQs

What is FIRPTA in a Broward County home sale?

• FIRPTA is a federal rule that requires tax withholding when a foreign person sells a U.S. real property interest, and it often applies in Broward closings.

How much FIRPTA is withheld at closing?

• The general withholding is 15 percent of the sale price, with potential 0 percent or 10 percent rates if the buyer will use the home as a residence and the price meets set thresholds.

Who is responsible for FIRPTA withholding in Florida?

• The buyer is usually the withholding agent, and title companies commonly handle the paperwork and remittance on the buyer’s behalf.

What is the FIRPTA deadline after closing?

• The withholding agent must file Form 8288 and send the withheld funds to the IRS within 20 calendar days of the transfer date.

Can a seller reduce FIRPTA withholding legally?

• Yes, a seller can apply for an IRS withholding certificate using Form 8288‑B to reduce or eliminate withholding if the standard amount exceeds the expected tax.

What documents does a foreign seller need for closing?

• Bring identification, any ITIN or SSN, and sale records such as basis and closing costs, especially if applying for a withholding certificate.

How does the residential exception work for FIRPTA?

• If the buyer will use the property as a residence, purchases at $300,000 or less can qualify for 0 percent withholding, and more than $300,000 up to $1,000,000 may qualify for 10 percent withholding.