If you're buying or selling a home in Naples and one of the parties is not a U.S. citizen or permanent resident, FIRPTA enters the picture. Most people haven't heard of it until they're already at the closing table — and that's exactly when it causes the most confusion, delays, and sometimes financial surprises. Here's a clear breakdown of how it works, who it affects, and what you need to do before closing.
What FIRPTA Actually Is
FIRPTA stands for the Foreign Investment in Real Property Tax Act. It was passed by Congress in 1980 with a straightforward goal: make sure that foreign sellers of U.S. real estate pay any capital gains taxes they owe before they leave the country. Without it, the IRS would have very little ability to collect taxes from a seller who lives abroad.
Naples is a natural place for this law to come up. We have a significant international buyer population — Canadian snowbirds, European investors, Latin American buyers purchasing second homes or investment properties. When any of these sellers eventually put their property on the market, FIRPTA kicks in.
The Key Mechanic: The Buyer Withholds, Not the Seller
This is the part that surprises most buyers. Under FIRPTA, the buyer — not the seller, not the title company — is legally the withholding agent. That means if you purchase property from a foreign seller and fail to withhold the correct amount, you could be held personally liable to the IRS for what should have been withheld.
The standard withholding rates are:
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15% of the total sale price for most transactions
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10% if the buyer will use the property as a primary residence and the sale price is between $300,001 and $1,000,000
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0% (no withholding) if the buyer will use it as a primary residence and the sale price is $300,000 or less
Keep in mind: for most Naples transactions, we're well above $300,000, which means the 15% rate typically applies unless the buyer is moving in as a primary resident and the price falls under $1 million.
A Real-World Example
A Canadian couple owns a Pelican Bay condo they purchased for $600,000 several years ago. They sell it for $900,000. At closing, the buyer must withhold 10% — $90,000 — and remit it to the IRS within 20 days. The sellers' actual capital gains tax on the $300,000 profit may only be $45,000 to $60,000. The IRS collects upfront and refunds the difference once the foreign sellers file a U.S. tax return. The process works, but it takes time and requires proper filing.
Who Counts as a "Foreign Person" Under FIRPTA?
This is not about visa status or where someone currently lives. It's a tax classification. A foreign person under FIRPTA generally includes nonresident aliens, foreign corporations, foreign partnerships, foreign trusts, and foreign estates. If a seller lives in Canada and has not established U.S. tax residency, they are a foreign person regardless of how many years they've owned the property or how often they've visited.
For U.S. citizens and permanent residents, the seller simply signs a Non-Foreign Person Affidavit (also called a FIRPTA Affidavit), which certifies they are not subject to FIRPTA. No withholding is required. If they provide false information, the liability falls on them.
The Filing Deadlines Are Strict
The buyer must file IRS Form 8288 and Form 8288-A within 20 calendar days of the closing date. As of early 2026, the IRS has also moved FIRPTA withholding payments to an electronic system — paper checks are no longer accepted. Buyers and closing agents need to be enrolled in EFTPS (the Electronic Federal Tax Payment System) before closing, not after.
Missing the deadline can trigger penalties of up to 25% of the withheld amount. This is not a situation where you want to figure things out after the keys change hands.
Can the Withholding Amount Be Reduced?
Yes — through a Withholding Certificate. If a foreign seller believes their actual tax liability will be less than the standard withholding amount, they can apply to the IRS using Form 8288-B before closing. If approved, the IRS issues a certificate that reduces the required withholding to the actual expected tax owed.
The catch: the IRS typically takes around 90 days to process these applications, and the withheld funds are generally held until the certificate is issued. This needs to be planned well ahead of closing. It can't be filed the week before. Foreign sellers who are aware of a sale months in advance should speak with a U.S. tax professional early in the listing process.
What This Means for Naples Buyers
If you're buying a property in Naples, one of the first questions your agent should help you answer is whether the seller is a U.S. person or foreign person. This should happen early — not the day before closing.
Here's what to do on the buyer side:
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Ask your agent to determine the seller's residency status during the contract phase
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Ensure your title company or attorney has FIRPTA experience and EFTPS enrollment in place
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Request the Non-Foreign Person Affidavit early if the seller is a U.S. person
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If the seller is foreign, work with a tax professional to determine the correct withholding rate and filing requirements
What This Means for Naples Sellers
If you're a foreign national selling a Naples property, the IRS is going to collect upfront. Expect that a portion of your sale proceeds will be held at closing and remitted to the IRS. You'll file a U.S. tax return and receive a refund if more was withheld than you owe — but that process takes time and requires you to have a U.S. Taxpayer Identification Number (ITIN) if you don't already have one.
If you're selling as part of a 1031 exchange, FIRPTA still applies. This creates a timing challenge because withheld funds may not be available to complete the exchange. Planning ahead with a qualified intermediary and a tax professional is essential in that scenario.
One New Wrinkle in 2026
Under the 2025 "One Big Beautiful Bill," a 1% excise tax is now imposed on certain transfers of funds sent outside the United States effective January 1, 2026. While this is separate from FIRPTA, it can apply alongside FIRPTA withholding in transactions where funds are being remitted abroad. Foreign sellers should discuss this with their tax advisor when calculating expected net proceeds.
Work with an Agent Who Catches This Before Closing
FIRPTA doesn't have to derail a closing. When it's identified early and the right professionals — a FIRPTA-experienced title company, a U.S. tax advisor, and a knowledgeable real estate agent — are involved from the start, transactions move smoothly. The problems arise when it surfaces late.
Naples has one of the highest concentrations of international buyers in Florida. FIRPTA transactions are not uncommon here. Whether you're a buyer purchasing from a foreign seller or a foreign national selling your property, make sure your team knows this territory well. Reach out to Chad Phipps for guidance on navigating the Naples market with the details handled correctly from day one.
FAQs
Does FIRPTA apply to Canadian snowbirds selling in Naples?
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Yes. Canadian citizens who have not established U.S. tax residency are considered foreign persons under FIRPTA, regardless of how long they've owned the property.
What happens if the buyer forgets to withhold?
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The buyer becomes personally liable to the IRS for the amount that should have been withheld, plus potential penalties and interest. This is why proper due diligence at the start of a transaction matters.
Can FIRPTA withholding be avoided entirely?
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Only in limited situations — primarily when the buyer is purchasing as a primary residence and the price is $300,000 or under. In most Naples transactions, withholding will apply; the goal is to get the amount right, not to avoid it.
Can the withheld amount be reduced below 15%?
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Yes, through a Withholding Certificate (Form 8288-B). The IRS processes these in about 90 days, so it must be applied for well before closing. Funds are typically held until the certificate is issued.
Do foreign sellers get the withheld money back?
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If the withholding exceeds the actual capital gains tax owed, yes — the difference is refunded after the foreign seller files a U.S. tax return. The process takes time and requires an ITIN if the seller doesn't already have one.
What forms are involved in a FIRPTA transaction?
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The buyer files IRS Form 8288 and Form 8288-A within 20 days of closing. The foreign seller receives a stamped copy of Form 8288-A from the IRS to use when filing their U.S. tax return to claim the withholding credit.
Does FIRPTA apply to condo purchases?
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Yes. FIRPTA applies to all U.S. real property interests, including condominiums, single-family homes, vacant land, and investment properties — regardless of property type or location.
