FIRPTA — the Foreign Investment in Real Property Tax Act — is a U.S. federal law that requires buyers to withhold 15% of the gross purchase price when purchasing real property from a foreign seller. Reduced rates apply only when the buyer acquires the property for use as a residence: 0% at $300,000 or less, 10% from $300,001 to $1 million, and 15% above $1 million. If the buyer will not use it as a residence, 15% applies at any price. The buyer is personally liable for the withholding if not collected. Foreign sellers may apply for a withholding certificate to reduce the amount.
Updated October 9, 2026
FIRPTA — the Foreign Investment in Real Property Tax Act — is a U.S. federal law that imposes withholding requirements on buyers who purchase real property from foreign sellers, as an advance payment against the foreign seller's potential U.S. tax liability on the sale.
Withholding rates
- 15% of the gross purchase price — the standard rate at any price, and the rate above $1 million even when the buyer will live in the property.
- 10% of the gross purchase price for properties priced between $300,001 and $1 million, where the buyer acquires the property for use as a residence.
- 0% for properties priced at $300,000 or below, where the buyer acquires the property for use as a residence.
Residence test: The reduced rates depend on the buyer's use, not the seller's. The buyer or a member of the buyer's family must have definite plans to live in the property for at least 50% of the days it is used during each of the first two 12-month periods after the purchase.
Who is responsible: The buyer is required to withhold the FIRPTA amount and remit it to the IRS. If the buyer fails to withhold when required, the buyer becomes personally liable for the withholding amount — even if the seller has fled the country.
Exemptions and reductions: Foreign sellers can apply to the IRS for a withholding certificate that reduces the withholding amount based on the actual anticipated tax liability — which is particularly useful when the seller's gain is significantly less than 15% of the gross price. The application process takes 90 days or more, so sellers should begin it well in advance of closing.
For buyers: In any transaction where the seller may be a foreign national, the buyer's attorney or title company should investigate the seller's status and ensure FIRPTA compliance before closing. The consequences of non-compliance — personal liability for the full withholding amount — can be significant.