FIRPTA and Selling California Real Estate

A general overview of what international sellers should discuss early with tax, escrow, title, and legal professionals.

What is FIRPTA?

FIRPTA is the Foreign Investment in Real Property Tax Act. When a foreign person disposes of a U.S. real property interest, federal withholding rules may apply. The buyer or other transferee is generally the withholding agent, even when a settlement or escrow professional helps process the closing.

The general rate is conditional

The IRS states that withholding is generally 15% of the amount realized, but exceptions, reduced rates, special rules, and different entity situations can apply. The amount realized may include cash, other property, and liabilities assumed or subject to the property. Fifteen percent is not automatically the seller’s final tax liability and should not be treated as a universal result.

Why early planning matters

Tell escrow and title about possible foreign-seller status as early as possible. A seller may need a taxpayer identification number, ownership documents, sale information, and other support. A withholding certificate request, including Form 8288-B in appropriate situations, may be part of planning for a reduced or eliminated withholding amount, but timing and eligibility matter.

Use the IRS FIRPTA withholding guidance and related IRS forms as the primary source, then get advice for the actual transaction.

Educational information only. Realty Savers does not provide tax, legal, immigration, escrow, title, accounting, or individualized financial advice. Consult a CPA or tax attorney, escrow/title professional, and other appropriate advisors.