Alright, grab your oat milk latte and let’s decode one of real estate’s least sexy—but most important—acronyms: FIRPTA.

It sounds like a made-up word your toddler would yell (“Mom, the FIRPTA took my snack!”), but it actually stands for the Foreign Investment in Real Property Tax Act. And if you ever handle, sell, or close on a property where one of the parties is not a U.S. citizen or resident, this little acronym can make or break the deal.

So let’s explain it like you’re five (but with the attention span of a millennial scrolling Zillow at midnight).

What the heck is FIRPTA?

FIRPTA is a federal law that says:

“If a foreign person sells U.S. real estate, a portion of the sale proceeds must be withheld and sent to the IRS — just in case taxes are owed.”

Basically, it’s Uncle Sam’s way of saying, “Hey, you can’t just sell your beach house in Florida, cash out, and bounce to Paris without paying taxes.”

The withholding amount is usually 15% of the sales price (not the profit — the entire price). This money is held until the foreign seller either files a tax return showing what they owe (or don’t owe) and gets any excess back from the IRS.

Why FIRPTA is such a big deal in real estate

Because if you don’t handle it correctly, the buyer can get stuck owing the IRS that 15%. Yep — even though the seller was foreign, you, the buyer, could be on the hook.

So, at every real estate closing, the title company, real estate agents, and sometimes even the lender need to confirm:

1. Is the seller a U.S. citizen or resident alien?
2. If not, does FIRPTA apply?
3. If it does, who’s making sure the money gets sent to the IRS?
   

Ignoring FIRPTA is like ignoring your car’s “check engine” light — everything seems fine until it’s really not.

What the FIRPTA form actually is

The main document involved is IRS Form 8288 (and sometimes 8288-A).

Here’s the quick breakdown:

• Form 8288 – Used by the buyer or settlement agent to report and send the withheld funds to the IRS.
• Form 8288-A – A copy goes to the seller and the IRS as proof that the money was withheld.
• Form W-8BEN – If the seller is foreign, this confirms their foreign status.
• Form W-9 – If the seller is not foreign, this form certifies they’re exempt from FIRPTA withholding.

In other words:
W-9 = “I’m American, no need to withhold.”
W-8BEN = “I’m foreign, yes you do need to withhold.”

How the closing actually works when a foreign seller is involved

Let’s walk through it step-by-step from the title company’s point of view:

1. The title company gets the contract

As soon as the file opens, the escrow officer will check whether the seller is a U.S. person or a foreign person. They’ll request a completed W-9 or W-8BEN.

2. Confirm foreign status

If the seller is foreign (no valid U.S. taxpayer ID, no Social Security number, etc.), the title company will notify both parties that FIRPTA applies.

3. Calculate the withholding

The title or closing agent calculates 15% of the total sales price — that’s the withholding amount that must go to the IRS.

Example:

• Sale price = $500,000
• FIRPTA withholding = $75,000
  

That $75K won’t go to the seller — it’s withheld at closing and sent to the IRS.

4. Handle the funds and paperwork

At closing, the buyer’s funds are disbursed like normal except for that withheld portion. The title company prepares IRS Form 8288 and 8288-A and mails them (with the check) to the IRS within 20 days of the closing date.

5. The seller’s refund (maybe)

Later, the foreign seller can file a U.S. tax return showing their actual gain or loss. If they owed less tax than what was withheld, the IRS refunds the difference.

Bonus: FIRPTA exemptions and pro tips

There are a few exceptions that can save everyone from FIRPTA drama:

1. Personal residence rule: If the property sells for $300,000 or less and the buyer intends to live there, no withholding is required.
2. Withholding certificate: The foreign seller can apply to the IRS before closing to reduce or eliminate the withholding if they expect little or no tax due.
3. Entity status: If the seller is an LLC, partnership, or trust — things can get complicated. The title company will ask for tax ID numbers and entity documents to determine if FIRPTA applies.

Why FIRPTA matters more than you think

FIRPTA is one of those behind-the-scenes compliance things that keeps real estate transactions clean and IRS-proof. If the title company skips it or the agents don’t check, everyone’s life gets messy fast.

It’s not about punishing foreign investors — it’s about making sure U.S. tax law keeps up with international ownership in a world where people from anywhere can buy a condo in Miami or a cabin in Wiscansin (shout-out to my fellow T-Pain fans).

FIRPTA in Millennial Plain English

• FIRPTA = “Foreign sellers have to pay taxes on U.S. real estate sales.”
• Buyers must withhold 15% of the sale price and send it to the IRS.
• The title company handles the paperwork and wires the money.
• Skipping FIRPTA = buyer potentially owes thousands to the IRS.
• Always collect a W-9 or W-8BEN early in the transaction.

Takeaway

FIRPTA isn’t cute or trendy, but it’s one of those real-estate grown-up things you have to get right.
Think of it like wearing sunscreen — you might not notice if you skip it once, but when you get burned, it’s going to hurt.

So next time a closing involves an international seller, don’t panic — just remember:
W-9 = chill, W-8BEN = hold the funds, send to IRS, and protect your buyer.

That’s FIRPTA in plain millennial English.

Please note: Any opinions discussed in this article belong solely to the author, Marissa Berends, and do not necessarily reflect the views of Capitol Lien.

About the Author
Marissa Berends is a Certified Abstractor and Industry Relations Coordinator at Capitol Lien, a nationwide due diligence and risk mitigation services provider. Since joining the company in September 2021, she has earned abstractor certifications in Minnesota, Nebraska, and North Dakota. She is pursuing her Wisconsin Title Examiner certification, which is expected to be completed in Fall 2025.

Marissa is involved with the following groups: Wisconsin Land Title Association’s (WLTA) Convention Committee & Young Title Professionals; Nebraska Land Title Association’s (NLTA) Convention Committee; Property Record Industry Association (PRIA) National Education Committee; Illinois Land Title Association’s (ILTA) Inclusion, Diversity, Equity & Acceptance (IDEA) Committee; and the National Association of Land Title Examiners and Abstractors (NALTEA).

About Capitol Lien

Capitol Lien empowers real estate and title professionals with trusted public record research and due diligence services nationwide. With 35 years of experience, Capitol Lien specializes in fast, accurate property and title searches, lien reports, and document retrieval that help title agents, underwriters, and legal teams operate their businesses with confidence. The Capitol Lien team takes the hassle out of title research with local experts and innovative tools that make it easier to mitigate risk, stay on schedule, and keep your closings moving smoothly.

Learn more at capitollien.com. Ready to simplify your title research? Send your next order to Capitol Lien and experience the difference trusted diligence makes. Stay in touch with Capitol Lien on LinkedIn for industry updates and information. Reach out! contact@capitollien.com or 800-845-4077.