Selling or buying a luxury property in Coral Gables with an international party involved? FIRPTA can affect your cash at closing and your timeline, especially on multi‑million‑dollar deals. In a few minutes, you will learn the key rules, rates, exceptions, and steps that keep your transaction on track. Let’s dive in.
What FIRPTA means in Coral Gables luxury sales
FIRPTA requires U.S. tax withholding when a “foreign person” sells a U.S. real property interest. The amount withheld is a prepayment of potential tax, not the final tax due. The seller settles the actual tax on a U.S. return and may receive a refund of any excess withholding. You can review the core rules in the IRS overview of FIRPTA withholding.
Who counts as a foreign person
A foreign person can be a nonresident alien individual, foreign corporation, partnership, trust, or estate. A U.S. person, including a resident alien, is not a foreign person for FIRPTA. The rules apply to U.S. real property interests, which include land and buildings and certain interests in U.S. corporations that primarily hold real estate. See the IRS summary of who is a foreign person and what is a USRPI.
The standard 15% on luxury deals
For most Coral Gables luxury sales priced above $1,000,000, the general FIRPTA rule applies: the buyer must withhold 15% of the amount realized (the gross sales price). This rate has been in effect for dispositions after February 16, 2016, as outlined in the IRS Internal Revenue Bulletin. The withholding is on the gross price, not the seller’s gain, as noted in the IRS FIRPTA overview.
Residence exceptions at lower prices
If an individual buyer intends to use the home as a residence and the price is $300,000 or less, no withholding is required. If the price is more than $300,000 but not more than $1,000,000, a reduced 10% withholding may apply. These residence‑based rules rarely help in high‑end Coral Gables sales over $1,000,000. Review the IRS page on residence exceptions and the IRB update on withholding rates.
Buyer’s role and liability
Under FIRPTA, the buyer is typically the withholding agent and can be personally liable for the required withholding plus penalties and interest if it is not collected and remitted. Closing agents often handle the mechanics, but the statutory responsibility rests with the buyer. See the IRS explanation of withholding agent liability.
Reducing or avoiding overwithholding
Non‑foreign certification for U.S. sellers
If the seller is a U.S. person, the buyer may rely on a valid certification of non‑foreign status, often provided via a signed Form W‑9 or an affidavit that meets Treasury Regulation requirements. See the certification rules in Treas. Reg. 1.1445‑2.
Withholding certificate for foreign sellers
A foreign seller who expects the actual tax to be less than the statutory withholding can apply for a withholding certificate using Form 8288‑B. The IRS typically acts on a complete application in about 90 days. If the certificate is not issued before closing, the buyer must still withhold at closing. When an application is properly pending at or before transfer, the buyer generally withholds at closing but may delay remitting as the IRS instructions to Form 8288‑B outline.
ITIN needs
If a foreign seller does not have a U.S. taxpayer identification number, an ITIN application (Form W‑7) often accompanies the 8288‑B submission. The IRS coordinates processing in FIRPTA cases, as described in the IRS Internal Revenue Manual.
Timeline and forms at closing
- Form 8288 and the withheld funds are generally due to the IRS within 20 days after the date of transfer. See About Form 8288.
- Form 8288‑A is filed with Form 8288 and provides the seller a stamped record of the withholding, which is used to claim a credit or refund on the seller’s U.S. tax return. See About Form 8288‑A.
- Form 8288‑B can reduce or eliminate withholding when appropriate. Review the Form 8288 instructions for timing and documentation.
Coral Gables luxury deal playbook
Plan cash flows early
In Coral Gables, luxury single‑family homes and waterfront estates often sell well above $1,000,000. Because withholding is on the gross price, the reserve can be significant. For example, 15% of a $5,000,000 sale is $750,000. The prevalence of high‑value sales in the area makes early planning essential, as reflected in local market coverage on Coral Gables property values.
Start screening at listing
- Confirm whether the seller is a U.S. person and request a signed W‑9 or non‑foreign affidavit when applicable.
- If the seller may be foreign, estimate the withholding so everyone understands the likely holdback.
- If reduced withholding is desired, begin the 8288‑B package and gather support promptly.
Coordinate title, escrow, and lender
Florida title and escrow teams often manage the forms and remittances, while lenders may require proof that FIRPTA obligations are satisfied or reserved in escrow before funding. In complex luxury deals, coordination with experienced closing counsel and the seller’s U.S. tax advisor is common practice. See the Florida Bar’s overview of FIRPTA responsibilities in closings.
Common Coral Gables scenarios
- Foreign seller, $2–$10M waterfront sale: expect 15% withholding on the gross price unless a withholding certificate is approved.
- Price $300,000 to $1,000,000 with an individual buyer who will occupy: a 10% reduced rate may apply.
- Mixed ownership: if one co‑owner is foreign and one is not, withholding may apply to the foreign owner’s share.
Pitfalls to avoid
- Assuming a seller is a U.S. person without a valid signed certification. Always collect and retain the proper affidavit or W‑9.
- Waiting to prepare the 8288‑B until late in escrow. Processing often takes about 90 days for complete applications.
- Failing to arrange funding for a large holdback. Confirm how the withheld amount will be covered and how it interacts with loan proceeds.
The bottom line
FIRPTA is straightforward once you focus on the few levers that matter: seller status, price point, residence exceptions, and timing of forms and funds. With early screening and coordinated escrow and lender workflows, you can protect your deal and keep your luxury Coral Gables closing calm and predictable.
For discreet, concierge‑level guidance on high‑end transactions involving international parties in Coral Gables, connect with Carlo Dipasquale. Our team helps you anticipate FIRPTA steps, align the right specialists, and close with confidence.
FAQs
What is FIRPTA and how does it affect a Coral Gables luxury sale?
- FIRPTA requires tax withholding when a foreign person sells U.S. real property, typically 15% of the gross sales price on high‑end deals, with the seller later reconciling tax on a U.S. return; see the IRS overview of FIRPTA withholding.
How much would be withheld on a $3,000,000 Coral Gables home if the seller is foreign?
- Under the general rule, the buyer would withhold 15% of $3,000,000 which equals $450,000. The amount is based on the gross price, not the seller’s gain.
Can a buyer avoid FIRPTA withholding by living in the Coral Gables home?
- Possibly only at lower price points: no withholding at $300,000 or less, or a reduced 10% rate between $300,000 and $1,000,000, if an individual buyer intends to use it as a residence; see residence exceptions.
Who sends FIRPTA funds to the IRS and when in a Coral Gables closing?
- The buyer is generally the withholding agent and must file Form 8288 and remit withheld funds to the IRS, usually within 20 days after transfer; see About Form 8288.
How can a foreign seller reduce FIRPTA withholding before closing in Coral Gables?
- Apply for a withholding certificate using Form 8288‑B. The IRS typically acts on complete applications in about 90 days; see the Form 8288 instructions.
What if only one co‑owner is foreign in a Coral Gables luxury sale?
- Withholding may apply to the foreign owner’s allocable share of the sale proceeds, while the U.S. owner’s share may not be subject to FIRPTA; see the IRS overview of FIRPTA withholding.
