FIRPTA has three brackets, not one rate — and the buyer is the one the IRS bills

The part that surprises everyone

Under IRC §1445, when a foreign person disposes of a U.S. real property interest, the law does not bill the seller — it makes the BUYER the withholding agent. The buyer is responsible for withholding the correct amount and remitting it, and the IRS can collect from the buyer, with penalties and interest, if it was not done. That single sentence is why careful closing teams screen seller status on every file, not just the ones that look international.

The second surprise: withholding is computed on the amount realized — generally the gross sales price — not on the seller's gain. A foreign seller seeing a loss on paper can still face a five- or six-figure withholding at the table. It is a deposit against the eventual tax, not the tax itself; the seller reconciles it on a U.S. return.

Educational information, not tax or legal advice. Seller status, exceptions, and every number on your file are questions for your tax professional — we compute and remit, we do not advise.

Bracket 1 — 15%, the default

With no qualifying reduction, the rate is 15% of the amount realized. On a $900,000 sale that is $135,000 leaving the closing table for the IRS. Nothing about the seller's mortgage payoff, commissions, or actual profit changes that figure — the rate applies to the price.

Bracket 2 — 10%, when the buyer will live there and the price is $1,000,000 or under

If the buyer acquires the property for use as a residence and signs the required certification, and the amount realized is $1,000,000 or less, the rate drops to 10%. On an $800,000 purchase, that is the difference between $120,000 and $80,000 withheld — $40,000 that stays in the seller's proceeds at closing instead of waiting on a refund.

Bracket 3 — zero, at $300,000 or under with the same residence intent

Where the amount realized is $300,000 or less AND the buyer will use the property as a residence with the required certification, withholding may be reduced to zero. This is the bracket that quietly decides deals in condo markets: two nearly identical units, one at $299,000 and one at $310,000, can carry completely different closing-table mechanics.

• The residence-intent certification is the buyer's statement, with the buyer's exposure behind it — it is not a formality the seller can supply.
• The dollar thresholds test the amount realized on THIS disposition, not the buyer's total purchase across properties.

The reduction most sellers do not know to ask about

A seller who expects the actual tax to be far less than the withholding can apply to the IRS for a withholding certificate on Form 8288-B, asking that a smaller amount be withheld. The application is filed on or before the closing date, and the sensible structure is to escrow the withholding while the determination is pending rather than remit and chase a refund.

Two mechanics decide whether that is even possible on your timeline: the seller generally needs a U.S. taxpayer identification number, and an ITIN application is not a closing-week errand. Raised at contract, it is paperwork. Raised at the table, it is a delay.

Run your own numbers first

Our FIRPTA Estimator implements exactly these three brackets against your price and the residence-intent question, and states on its face that the determination belongs to your tax professional. Run it before you sign, then bring the number to your team — the goal is that nothing about the withholding is a surprise on closing day.