The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) requires buyers in certain transactions involving foreign sellers to withhold up to 15% of the amount realized (typically the sales price) by the foreign seller for federal tax purposes. The withholding rules depend on both the sales price and the buyer’s intent to use the property as a residence.

• If a property’s sales price is $300,000 or less and the buyer or a member of the buyer’s family has definite plans to reside at the property for at least half the year for each of the two years following the closing, nothing needs to be withheld and no reporting to the IRS is required.
• If the property's sales price is between $300,001 and $1,000,000 and the buyer or a member of the buyer’s family has definite plans to reside at the property for at least half the year for each of the two years following the closing, 10% of the sales price must generally be withheld and reporting to the IRS is required.
• If neither situation applies, 15% must generally be withheld and reporting is required.

The buyer must use IRS Form 8288 and IRS Form 8288-A to report and pay the withheld tax.

Possibly. If an agent knows that a certification is false and fails to notify the buyer of this knowledge, that agent will be responsible for paying the tax to the IRS. This payment is limited to the amount of commission that the agent earned in the transaction.

The seller may request an adjustment of the amount withheld from the IRS by filing a withholding certificate application (IRS Form 8288-B). The buyer or buyer’s agent can also request this adjustment.

The IRS will generally act on the request within 90 days of receipt of an application. A seller who applies for an adjusted withholding must notify the buyer in writing that the certificate has been applied for no later than the closing date. Since the seller’s agent may not make the request on behalf of the seller, the seller’s agent should discuss the withholding certificate with the seller as an option during the negotiation process.

The IRS allows a seller to exclude from his taxable income a gain of up to $250,000 on the sale of his home (or $500,000 if he is married filing jointly) if he:

1. owned the home and used it as his principal residence during at least two of the last five years before the sale,
2. didn’t acquire the home through a 1031 exchange during the past five years, and
3. didn’t exclude a gain on another home sold during the two years before the current sale.

See IRS Publication 523 for more information.

Will possibly need to be changed if the SB 23 changes are voted in this November 2025. SB 23 raises the additional exemption for Seniors from $10,000 to $60,000. There’s no change to the eligibility, procedures, or calculation methods for transferring the existing tax freeze.