In the global hub of Miami Real Estate, international buyers and sellers are part of everyday transactions.
But when a foreign owner sells property in Miami or South Florida, a federal tax rule called FIRPTA may apply — and it can significantly impact the closing process.
At Zagury Scott PA, we regularly guide clients through FIRPTA compliance to ensure smooth closings and proper IRS reporting.
Here’s what you need to know.
What Is FIRPTA?
FIRPTA (Foreign Investment in Real Property Tax Act) is a federal tax law that applies when a foreign person sells U.S. real estate.
If FIRPTA applies:
- A portion of the sale proceeds may be withheld at closing
- The withheld amount is sent directly to the IRS
- The buyer is typically responsible for ensuring compliance
Important:
FIRPTA is not a penalty. It is a federal compliance requirement.
The purpose is to ensure that foreign sellers satisfy potential U.S. capital gains tax obligations.
How FIRPTA Impacts a Real Estate Closing
In the fast-paced South Florida real estate market, FIRPTA affects much more than just taxes.
It directly impacts:
✔ Seller proceeds at closing
✔ Required affidavits and documentation
✔ Timing and logistics of funding
✔ IRS reporting obligations
✔ Buyer liability exposure
If not handled properly, FIRPTA can delay closing — or create serious liability for the buyer.
How Much Is Withheld Under FIRPTA?
In most cases:
- 15% of the gross sales price may be withheld
This is based on the total contract price — not the seller’s profit.
However, certain exceptions and reductions may apply depending on:
- Purchase price thresholds
- Buyer occupancy intentions
- Seller eligibility for a withholding certificate
This is where early guidance from a Real Estate Attorney becomes critical.
Why FIRPTA Matters in Miami & South Florida
Miami is one of the most internationally invested real estate markets in the United States.
That means:
- Many sellers are foreign nationals
- Many properties are owned through foreign entities
- Transactions often involve international tax considerations
In these cases, assuming FIRPTA does not apply can be costly.
Failure to properly withhold and remit funds can result in:
- IRS penalties
- Buyer liability
- Delayed distributions
- Complications after closing
In other words — this is not an area for guesswork.
Required FIRPTA Documentation
FIRPTA compliance typically involves:
- Seller affidavit regarding foreign or non-foreign status
- Taxpayer identification verification
- IRS Forms (including Form 8288 and 8288-A)
- Possible withholding certificate application
- Proper remittance of withheld funds to the IRS
Every step must be handled accurately and on time.
The Most Important FIRPTA Rule: Do Not Assume
If there is any possibility that a seller is a foreign person:
Do not guess.
Do not rely on assumptions.
Do not wait until closing week.
Early legal and tax review protects everyone involved.
At Zagury Scott PA, we advise clients to confirm early:
✔ Whether FIRPTA applies
✔ What documentation is required
✔ Whether a withholding reduction is available
✔ That any required withholding is properly sent to the IRS
Why Work With a Miami Real Estate Attorney for FIRPTA?
Title companies process closings.
A Real Estate Attorney protects your legal exposure.
FIRPTA compliance requires coordination between:
- Buyer
- Seller
- CPA
- Title company
- IRS
Our role is to:
- Review seller status early in the transaction
- Structure contracts properly
- Advise on withholding certificates
- Coordinate IRS filings
- Protect buyers from unexpected liability
- Ensure sellers receive proper credit when filing U.S. tax returns
In the complex world of South Florida Real Estate, proactive legal oversight makes all the difference.
Common FIRPTA Mistakes in South Florida Transactions
We frequently see:
- FIRPTA addressed too late in the process
- Buyers unaware they carry withholding responsibility
- Sellers surprised by reduced proceeds
- Improper documentation submitted to the IRS
- Withholding certificates filed too close to closing
Each of these mistakes can delay funding or create post-closing complications.
How to Protect Your Real Estate Transaction
If you are:
- A foreign seller listing property
- A buyer purchasing from an international owner
- A real estate agent representing foreign clients
- An investor selling South Florida property
You should confirm FIRPTA status at the beginning of the transaction — not at the closing table.
Final Thoughts
FIRPTA is not a penalty.
It is not optional.
And it is not something to address at the last minute.
In a global market like Miami, proper FIRPTA handling is part of responsible transaction management.
The earlier it is addressed, the smoother the closing.
Schedule a Consultation with Zagury Scott PA
If you are involved in a Real Estate transaction where a seller may be a foreign person, speak with an experienced Real Estate Attorney before closing.
At Zagury Scott PA, we help clients across Miami and South Florida navigate FIRPTA compliance with clarity, efficiency, and protection.
Contact us today to ensure your closing is structured properly from day one.
