When a foreign individual sells real estate, the buyer, or the closing agent, must generally withhold 15% of the gross sale price, remit it to the IRS, and file Form 8288-A. This withheld amount does not necessarily represent the seller’s actual tax liability, but it functions as an advance payment. Under certain conditions, the withholding can be reduced or even removed, such as when the buyer intends to use the property as a primary residence, and the price falls below specific thresholds.

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For example, if an investor sells a property for $500,000, the standard withholding would be $75,000 until the IRS determines the final tax obligation.

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Possible exceptions and certifications

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There are mechanisms that allow sellers to lower or avoid the withholding requirement. A foreign seller may submit Form 8288-B to the IRS to request a reduced withholding based on their estimated final tax. It is also critical to verify whether the buyer or closing agent obtained the correct certification confirming that the seller is not a foreign person, or that the transaction qualifies for an exception outlined in the regulations.

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The role of advisors and agents in ensuring compliance

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International real estate transactions usually involve several parties: sellers, buyers, agents, attorneys, and tax professionals. Working with specialists experienced in cross-border investments is a smart decision. They can guide investors through withholding requirements, advise on legal structures, confirm that all obligations are met, and ensure deadlines and documentation align with federal rules. With proper guidance, the transaction moves more smoothly, minimizing the risk of unexpected tax complications or compliance issues.

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Recommendations for international investors

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To navigate an investment successfully, foreign buyers and sellers should prepare several steps in advance:

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• Review property documents, verify the seller’s identity, and confirm their tax residency status.

• Coordinate closing timelines, withholding obligations, and forms with the buyer, agent, and tax advisor.

• Assess the tax impact in the investor’s home country, including any applicable double-tax treaties that may reduce the overall burden. To dive deeper into real estate taxes in the U.S., you can check out our guide on property tax and capital gains.

• Consider post-sale obligations: capital gains tax, optimal entity structures, and potential withholding refunds.

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Investing with confidence and foresight

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Foreign investors involved in U.S. real estate transactions must understand FIRPTA. Informed buyers and sellers reduce risks, stay compliant, and avoid unnecessary withholding. While some steps may seem complex, good documentation, professional advice, and proper planning lead to far better outcomes. With tailored guidance, clear procedures, and tools that support each phase of the transaction, investing in the U.S. property market becomes a far more organized and predictable experience.