🌍FIRPTA Withholding and Immigration Status

FIRPTA withholding can become complicated when a seller’s immigration status changes before closing. Learn why residency status at the time of sale matters and what buyers, settlement agents, real est

We’re seeing an increase in FIRPTA issues related to sellers undergoing immigration status changes, particularly in deportation proceedings. These situations can complicate transactions, especially when they shift a seller’s tax classification mid-process.

Here’s what’s important:

Key IRS Facts

• FIRPTA applies when the seller is a “foreign person” at the time of sale.
  This includes nonresident alien individuals, foreign corporations, and certain foreign trusts/estates.

• Buyers must withhold 15% of the sale price when acquiring U.S. real estate from a foreign person.

• The seller’s residency status at the time of closing, not at purchase, determines whether FIRPTA applies.
  A change in status before the sale (such as becoming a nonresident alien) may trigger FIRPTA withholding requirements.

• If the buyer fails to withhold when required, they may be held liable for the tax.

We’re Seeing More of These Cases

As these situations become more common, we encourage settlement agents, real estate professionals, and attorneys to be proactive when immigration status is in question—especially ahead of a closing.Our office is helping more clients navigate this intersection between tax and immigration, and we’re here to assist if questions arise.

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