Brighton · Ann Arbor · Fenton
Seller Resources
If the seller of a U.S. property is not a U.S. citizen or permanent resident, a federal law called FIRPTA requires a percentage of the sale price to be withheld and sent to the IRS. Here's what the law means for your sale — and exactly what we do at closing to handle it.
What is FIRPTA?
FIRPTA — the Foreign Investment in Real Property Tax Act of 1980 — ensures the IRS collects tax on the gain a foreign person realizes when selling U.S. real estate. It applies no matter where the seller lives: a seller who lives and works in Michigan but is not a citizen or lawful permanent resident is still a "foreign person" under FIRPTA.
FIRPTA stands for the Foreign Investment in Real Property Tax Act, passed by Congress in 1980. It requires the buyer — not the seller — to withhold a percentage of the gross sales price and remit it to the IRS whenever the seller is a foreign person.
The standard withholding is 15% of the amount realized (the gross sales price, not the seller's profit). A reduced 10% rate can apply to homes sold for $300,001–$1,000,000 when the buyer will use the property as a residence, and no withholding is required for sales of $300,000 or less when the buyer will use it as a residence.
A foreign person is anyone who is neither a U.S. citizen nor a lawful permanent resident (green card holder). It does not matter where they live, how long they've been here, or whether the property is their home.
A seller who expects the withholding exceeds their actual tax bill can apply for a withholding certificate on IRS Form 8288-B to reduce or eliminate the withholding. Without one, the withheld funds go to the IRS with Forms 8288 and 8288-A within 20 days of closing, and the seller claims any refund on their tax return.
What we have to do
When a seller is not a U.S. citizen or permanent resident, our closing team administers FIRPTA on the file. Here is the process we follow on every FIRPTA closing:
At order intake
We ask about the seller's citizenship and residency status when the order comes in, not the week of closing. FIRPTA paperwork takes time, and a late discovery can push back your closing date.
If the seller tells us they are not a citizen or permanent resident, we flag the file as a FIRPTA transaction and begin preparing the requirements immediately.
Note: Tell us as early as you can — even at offer stage.
Before closing
Every seller at our closings signs a non-foreign status affidavit unless their status tells us otherwise. For a foreign seller, we collect the identification and residency details that determine the withholding rate — passport, visa, and green card status all matter.
The seller's answers decide whether the transaction is exempt, qualifies for a reduced rate, or requires the full 15% withholding.
Note: Citizenship and residency are different tests — both matter.
Before closing
If the seller wants to reduce or eliminate the withholding — common when little or no gain is expected — we coordinate the withholding certificate application on IRS Form 8288-B. With an approval in hand, the buyer withholds the reduced amount stated on the certificate instead of the full rate.
We also guide the seller through the tax identification steps a foreign seller needs, including an Individual Taxpayer Identification Number (ITIN) or Employer Identification Number (EIN), and coordinate with their tax professional.
Note: Form 8288-B can take weeks — file early.
At and after closing
At closing we withhold the required percentage of the gross sales price from the seller's proceeds and hold it for remittance.
We prepare IRS Forms 8288 (withholding tax return) and 8288-A (each seller's withholding statement), then send the withheld funds and the forms to the IRS within 20 days of the closing date. The seller receives copies for their tax records and claims their actual tax liability — and any refund — on their U.S. tax return.
Note: The 20-day IRS deadline is firm.
Why it matters: if the buyer doesn't withhold — or withholds late — the IRS holds the buyer liable for the tax, plus penalties and interest. Getting the determination right at the start protects everyone at the table.
Our closings team works with foreign sellers across Michigan every year. Call us early in the transaction and we'll map out exactly what your closing needs — withholding, forms, and timeline — before your contract date arrives.
This page provides general information about FIRPTA and is not tax or legal advice. Withholding rates, reduced-withholding applications, exceptions, and filing deadlines depend on the details of each transaction and each seller's residency and tax situation. Always consult a qualified tax professional or attorney about your specific FIRPTA obligations. Our role at closing is to administer the withholding and required IRS filings on the transaction's terms — we do not determine individual tax liability.
