Central Florida has one of the highest concentrations of foreign national real estate buyers and sellers in the country. If you’re working with someone from outside the US, or if you’re a foreign national yourself buying or selling property here, there’s a federal tax law you need to understand before you get to the closing table.
It’s called FIRPTA. Most people have never heard of it until it comes up in their transaction. At that point, if nobody prepared you for it, it can feel like a blindside. This post is meant to fix that.
FIRPTA stands for the Foreign Investment in Real Property Tax Act. It’s a federal law enacted in 1980 that requires foreign persons to pay US income tax on any gain they realize from selling US real property. The logic behind it is straightforward: the US government wants to make sure it collects tax on profits made from US real estate, even when the seller lives abroad and might otherwise be out of reach.
For most domestic transactions, FIRPTA is invisible. But when a foreign national is on the seller’s side of a deal, it becomes a real factor that affects how the closing is structured and how funds are handled.
Here’s where it gets practical. Under FIRPTA, the buyer is responsible for withholding 15% of the gross sales price and sending it directly to the IRS. Not 15% of the profit. 15% of the total purchase price.
That withheld amount is treated as a prepayment of the foreign seller’s US tax liability. If the seller’s actual tax bill ends up being less than what was withheld, they can file for a refund. If it’s more, they owe the difference.
This matters because the withholding obligation falls on the buyer. If a buyer purchases from a foreign seller and fails to withhold, the IRS can come after the buyer for the unpaid amount. That’s an uncomfortable situation nobody wants to be in.
There are situations where FIRPTA withholding is reduced or not required at all. The most relevant ones for residential transactions in Central Florida:
Central Florida sees a higher-than-average volume of international buyers and sellers. The Orlando area specifically draws significant investment from Canada, Brazil, the UK, Venezuela, Colombia, and other countries. Short-term rental properties in the vacation corridor are a particularly common area where foreign ownership shows up.
If you’re buying a property here and the seller is a foreign national, FIRPTA is your concern too, not just theirs. A good title company and a real estate attorney who knows international transactions can navigate this cleanly. I’ll make sure you have the right people at the table when it applies.
Bring it up early. FIRPTA issues discovered late in a transaction can delay closing or create complications that could have been avoided with more lead time. If you’re a seller who is a foreign national, your tax advisor needs to be involved from the beginning. If you’re a buyer purchasing from a foreign seller, make sure your agent and closing agent are aware so they can structure the transaction correctly.
The IRS has clear guidance on FIRPTA withholding and the exceptions. Your closing agent at the title company will also have handled FIRPTA transactions before and can walk through the mechanics with you. This is not uncharted territory — it just needs the right professionals involved.
Official IRS Resources
IRS.gov: FIRPTA Withholding — the authoritative source on how withholding works and how to remit it.
IRS.gov: Exceptions From FIRPTA Withholding — full list of exemptions and how to qualify for them.
Buying or selling in Central Florida and not sure whether FIRPTA applies to your situation? Reach out and I can point you toward the right resources and make sure the right people are involved from the start.
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