PATH Act and Its Impact on Your U.S. Tax Filings
Expert FIRPTA guidance from IRS Enrolled Agents & Certified Acceptance Agents — serving clients in the UK, UAE, Qatar, Saudi Arabia, Singapore & worldwide
What Is FIRPTA and Why Does It Matter to Foreign Property Sellers?
When a foreign person sells U.S. real estate, the Foreign Investment in Real Property Tax Act (FIRPTA) generally requires the buyer to withhold 15% of the gross sales price and remit it to the Internal Revenue Service (IRS). This withholding applies regardless of whether the seller actually owes that much in tax.
However, FIRPTA withholding is not always mandatory. There are important exceptions that can significantly reduce or even eliminate the amount withheld — if the correct procedures are followed before or at the time of closing.
Whether you are a UK national selling a Florida holiday home, a Qatari investor disposing of a New York apartment, a UAE-based business owner exiting a Texas commercial property, a Saudi national selling a Californian rental, or a Singapore resident liquidating a U.S. real estate portfolio — understanding these exceptions could save you thousands of dollars in unnecessarily withheld tax.
Below, we explain the five key FIRPTA withholding exceptions every foreign property seller should know.
1. The $300,000 Primary Residence Exception
FIRPTA withholding is not required if two conditions are met:
- The property sells for $300,000 or less; and
- The buyer intends to use the property as their primary residence.
To qualify, the buyer must sign a written affidavit confirming their intention to occupy the property for at least 50% of the time over the following two years. This is one of the most commonly used FIRPTA exceptions and is particularly relevant for lower-value residential sales.
| ✓ Who benefits most?
Foreign sellers disposing of modest residential properties to owner-occupier buyers. Common in states like Florida, Texas, and Arizona where international investors hold entry-level properties. |
2. Reduced Withholding Certificate (IRS Form 8288-B)
If the actual tax liability on the sale is less than 15% of the gross proceeds, the seller can apply for a Withholding Certificate using IRS Form 8288-B before closing. When the IRS approves the application, the withholding amount may be reduced or entirely eliminated.
This exception is particularly useful when:
- The seller has a low capital gain or even a loss on the sale.
- The seller qualifies for reduced tax rates under an applicable U.S. tax treaty.
- The calculated tax liability is significantly lower than the 15% default withholding.
| ⚠ Important Timing Note
The Form 8288-B application must be filed BEFORE or at the time of closing. If you wait until after closing, the full 15% withholding will apply at settlement, and you will need to claim a refund via a U.S. tax return — a process that can take 6–12 months. |
3. Non-Foreign Status Certification (Seller’s Affidavit)
If the seller is not considered a foreign person for U.S. tax purposes, FIRPTA does not apply at all. To invoke this exception, the seller provides a written certification (often called a FIRPTA affidavit or non-foreign affidavit) confirming:
- They are not a foreign person under U.S. tax law; and
- The certification includes a valid U.S. taxpayer identification number (TIN/SSN/ITIN).
When a valid non-foreign certification is provided, the buyer has no obligation to withhold any amount under FIRPTA.
| 💡 Relevance for Expats & Dual Nationals
Many British-American, Singaporean-American, and Gulf-based dual nationals are unaware they may qualify as non-foreign persons for FIRPTA purposes. If you hold a U.S. green card or meet the substantial presence test, this exception may apply to you — consult a qualified IRS Enrolled Agent to confirm. |
4. No Gain or Zero Tax Liability
If the sale produces no taxable gain — for example, the property is sold at a loss or at the original purchase price — the withholding may be avoided by filing for a Withholding Certificate (Form 8288-B) before closing.
Without applying for the certificate in advance, the standard 15% withholding will still apply at closing, even if no gain exists. After closing, the seller can reclaim the excess by filing a U.S. Non-Resident Income Tax Return (Form 1040-NR).
5. Corporate and Partnership Exceptions
Certain domestic corporations and publicly traded entities may qualify for specific FIRPTA exemptions where withholding does not apply. These cases are highly technical and depend on entity classification, ownership structure, and the nature of the U.S. real property interest being disposed of.
A professional review by a qualified tax advisor is essential to determine eligibility for corporate-level FIRPTA exceptions.
What If 15% FIRPTA Withholding Has Already Been Deducted?
If the full 15% withholding was applied at closing and your actual U.S. tax liability is lower, you are entitled to claim a refund. The process involves:
- Filing a U.S. Non-Resident Income Tax Return (Form 1040-NR) to calculate the actual capital gain.
- Claiming a refund of the excess FIRPTA withholding on the return.
- Obtaining or renewing an ITIN (Individual Taxpayer Identification Number) if required to file.
| 🕒 Processing Times
FIRPTA refund claims typically take 3–6 months to process when filed correctly. Errors or missing documentation (especially ITIN issues) can extend the timeline to 12 months or more. Working with a qualified IRS Enrolled Agent and ITIN Certified Acceptance Agent significantly reduces delays. |
Frequently Asked Questions (FAQ)
(Structured for Google FAQ Rich Results & AI Search)
Q: What is FIRPTA withholding?
A: FIRPTA (Foreign Investment in Real Property Tax Act) requires buyers to withhold 15% of the gross sales price when purchasing U.S. real estate from a foreign seller. This withholding is remitted to the IRS as a prepayment against the seller’s potential U.S. tax liability.
Q: Can FIRPTA withholding be reduced or avoided?
A: Yes. There are five key exceptions: the $300,000 primary residence exception, the reduced withholding certificate (Form 8288-B), non-foreign status certification, zero gain situations, and certain corporate or partnership exemptions.
Q: How do I claim a FIRPTA refund?
A: File a U.S. Non-Resident Income Tax Return (Form 1040-NR) reporting the actual gain from the sale. If your tax liability is less than the 15% withheld, you will receive a refund of the excess. An ITIN is required to file.
Q: Do I need an ITIN to sell U.S. property?
A: Yes. Foreign sellers typically need an Individual Taxpayer Identification Number (ITIN) to file a U.S. tax return and claim any FIRPTA withholding refund. Our offices in London, Dubai, Doha, Khobar, and Singapore are IRS Certified Acceptance Agents authorised to process ITIN applications.
Q: Does the US-UK tax treaty affect FIRPTA?
A: While the U.S.-UK tax treaty provides benefits for many types of income, FIRPTA withholding on real property gains is generally not eliminated by the treaty. However, the treaty may reduce the effective tax rate, making a Form 8288-B application beneficial.
Q: Can a UAE or Qatar resident avoid FIRPTA withholding entirely?
A: In most cases, no. UAE and Qatar residents selling U.S. real property are subject to FIRPTA. However, the withholding amount may be reduced or eliminated through the exceptions described above — particularly the $300,000 exemption or a withholding certificate if the gain is low or zero.
Q: How long does a FIRPTA refund take?
A: Correctly filed FIRPTA refund claims typically take 3–6 months. Incomplete applications, ITIN delays, or errors can extend processing to 12 months or longer.
Summary: FIRPTA Withholding Exceptions at a Glance
| # | Exception | Key Requirement |
| 1 | $300,000 Residence Exception | Sale price ≤ $300K and buyer will use as primary residence |
| 2 | Withholding Certificate (8288-B) | Apply before closing; actual tax < 15% withholding |
| 3 | Non-Foreign Status Certification | Seller certifies they are not a foreign person with valid TIN |
| 4 | No Gain / Zero Liability | Apply for a withholding certificate before closing if no gain |
| 5 | Corporate / Partnership Exception | Specific domestic corporations or publicly traded entities |
Need Expert Help with FIRPTA, ITIN, or U.S. Tax Filing?
FIRPTA withholding is often misunderstood. While 15% is the general rule, it is not always the final tax owed. Proper planning before closing can save you significant money and avoid months of waiting for refunds.
Our team of IRS Enrolled Agents and ITIN Certified Acceptance Agents specialises in U.S. tax compliance for non-residents and foreign investors. We assist with:
- FIRPTA withholding reduction and refund claims
- U.S. Non-Resident Tax Returns (Form 1040-NR)
- ITIN applications and renewals (as IRS Certified Acceptance Agents)
- FATCA compliance and FBAR reporting
- U.S. personal tax (Form 1040 / 1040-NR) compliance
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