What Happens When a Foreign National Sells a Miami Property? How Does FIRPTA Affect the Sale?
By Roman Ivanov, REALTOR® at REAL | 786-909-4892 | MiamiFineLiving.net
Foreign nationals who own Miami real estate often focus intensely on the purchase process — and give relatively little thought to what happens at the other end when it is time to sell. FIRPTA — the Foreign Investment in Real Property Tax Act — is the piece of the puzzle that catches most international sellers by surprise, and it needs to be understood well before the day you decide to list. Here is how it works in Miami FL real estate 2026.
What FIRPTA Is and Why It Exists
Enacted in 1980, FIRPTA was designed to ensure that foreign nationals who profit from selling U.S. real estate pay U.S. capital gains tax on those profits — and do not simply take the proceeds offshore without settling their U.S. tax obligation. The mechanism Congress chose is a withholding requirement placed on the buyer: when a foreign national sells U.S. real estate, the buyer is legally required to withhold a portion of the gross purchase price and remit it to the IRS at closing.
The Withholding Rate: 15 Percent of the Gross Sale Price
The standard FIRPTA withholding rate is 15 percent of the gross purchase price — not 15 percent of the profit. This distinction is critical. On a $2M sale, $300,000 goes directly to the IRS at closing, regardless of what the seller originally paid for the property or how much actual gain was realized. If the seller bought the property for $1.8M and is selling for $2M, their actual gain is $200,000 — but the withholding is $300,000, meaning they are temporarily over-withheld by $100,000. That excess is recoverable through a tax return, but the cash is held by the IRS until the return is filed and processed.
"FIRPTA is the conversation I always have with international buyers during the purchase — not when they call me five years later saying they want to sell. Planning for it upfront — through ownership structure, proper record-keeping, and the withholding certificate process — can save sellers significant time and money at the closing table." — Roman Ivanov, REALTOR at REAL
The Withholding Certificate: The Tool to Reduce or Eliminate Over-Withholding
Foreign national sellers who can demonstrate to the IRS that their actual tax liability is less than the standard 15 percent withholding can apply for a FIRPTA withholding certificate before or during the sale. This application — filed on IRS Form 8288-B — requests that the IRS reduce the withholding to the seller's actual projected tax liability. The certificate process typically takes 60 to 90 days, which means sellers need to begin this process as soon as the property is listed or under contract — not at the last minute.
When FIRPTA Does Not Apply
FIRPTA withholding is not required in every transaction. The primary exemption relevant to Miami's market is the buyer's primary residence exemption: if the property sells for $300,000 or less and the buyer intends to use it as a primary residence, FIRPTA withholding is not required. A secondary exemption applies to sales of $1M or less when the buyer intends to use the property as a residence — in which case the withholding rate drops to 10 percent. For most of Miami's international buyer market — where transaction prices routinely exceed $1M — these exemptions have limited application.
How Ownership Structure Affects FIRPTA at Sale
International buyers who structured their purchase through a U.S. LLC owned by a foreign corporation can potentially avoid FIRPTA at the sale of the LLC interest, since FIRPTA applies to U.S. real property interests — and a transfer of LLC membership interests may be treated differently than a direct sale of real estate, depending on how the structure was established. This is a nuanced area of law where experienced international tax counsel is essential. The planning done at purchase — selecting the right ownership structure from day one — directly affects the FIRPTA exposure at sale.
Roman Ivanov, a 1-year veteran REALTOR at REAL with over 160 homes sold and 50 Google 5-star reviews, includes FIRPTA planning conversations as a standard part of the buying process for every international client. Roman Ivanov real estate REAL Miami FL buyers know their exit tax picture before they close on the purchase. Browse Aventura Intracoastal-view properties, Fort Lauderdale homes between $1M and $2M, and Bay Harbor Islands properties in the same range to start your search with the full ownership and exit picture understood from the beginning.