Buying an Orlando Vacation Home From a Foreign Seller: FIRPTA and What the Buyer Must Do

When the seller is foreign, a third party joins the closing – and the law makes the buyer its collection agent

By David Myers, Broker Associate · MyOrlandoVacationHome.com · Last updated October 2026

Orlando vacation homes draw owners from outside the US, so a buyer in a resort community can easily end up buying from a foreign seller. Under FIRPTA, the buyer is the withholding agent and must generally withhold 15% of the price for the IRS when the seller is a foreign person. Lower rates apply only when an individual buyer plans to live in the home for at least half the days anyone uses it, which rarely fits a home bought to rent. The buyer files Forms 8288 and 8288-A and sends the money within 20 days after closing, and can be held liable for tax that wasn't withheld. A seller can apply for a withholding certificate to reduce the amount; the Florida Realtors FIRPTA addendum covers the escrow option and a seller who comes up short at closing.

When the seller is foreign, there's a third party at the closing table. It never signs anything, never shows up, and still takes its share first... the IRS.

The federal law that covers it, FIRPTA, makes the buyer the one who collects. Get it wrong and the tax can become your bill, so here's how it works and what to settle before you sign.

What Is FIRPTA, and Why Is It the Buyer's Problem?

It's a federal law that has the buyer hold back tax from a foreign seller's proceeds.

The Foreign Investment in Real Property Tax Act (FIRPTA) makes sure the US collects tax when a foreign person sells US real estate. The IRS says that in most cases the buyer is the withholding agent, and if the seller is foreign and the buyer fails to withhold, the buyer may be held liable for the tax. The withholding is a prepayment toward the seller's US tax, not an extra cost to the buyer – unless the buyer skips it.

How Much Does the Buyer Withhold?

Usually 15% of the amount realized – less only if you'll live in the home.

26 USC 1445 and IRS FIRPTA guidance. The residence exceptions apply only to an individual buyer who meets the IRS residence-use test.

The amount realized is generally the price, including any debt the buyer takes over. The lower rates need an individual buyer, or a member of the buyer's family, with definite plans to live in the home for at least half the days it's used by anyone during each of the first two years; vacant days don't count. Guest nights count as days the home is used, so a vacation home bought to rent most of the year is unlikely to qualify. If you claim the exception and then miss the test, you can still be liable unless the shortfall came from a change in circumstances you couldn't reasonably have anticipated.

How Do You Know Whether the Seller Is Foreign?

Ask early, and get a signed certification if the seller says they aren't.

A seller who isn't foreign can sign a certification under penalty of perjury giving their name, US taxpayer identification number and home address (a valid Form W-9 also counts). You can rely on it unless you know, or are told by an agent, that it's false. No certification, no exemption: the buyer withholds.

The name on the deed doesn't always settle it. If the seller is an LLC, look behind it: a single-owner LLC is usually ignored for tax purposes, so the IRS looks through it: the LLC can't certify, and its owner has to. A foreign owner behind a Florida LLC is still a foreign seller. Watch for a foreign mailing address on the tax bill or an owner who lives abroad, and raise it with the title company when the contract is signed, not the day before closing.

What Forms and Deadlines Apply?

Forms 8288 and 8288-A, with the money, within 20 days after closing.

The buyer files Form 8288 with a Form 8288-A for each seller and sends the withheld tax to the IRS by the 20th day after the transfer. The IRS sends the seller a stamped copy of Form 8288-A, which the seller uses to claim credit on their US return – but only if the seller's US taxpayer identification number is on it.

Ask your title company or closing agent whether it will prepare the forms, hold the money and file for you. The legal duty stays with the buyer either way, so get the arrangement in writing.

Can the Seller Reduce the Withholding?

Yes – with a withholding certificate from the IRS, ideally applied for before closing.

A foreign seller can apply on Form 8288-B for a withholding certificate that reduces or eliminates the withholding, usually because the actual tax on the gain is less than 15% of the price. The IRS says it will normally act within 90 days of a complete application. The buyer must still withhold at closing even if an application is pending, but the money doesn't have to go to the IRS until 20 days after the IRS makes its decision. To use that route, the seller has to give the buyer a written notice before closing with their name, address and taxpayer number, a description of the property and the date the application went in.

The Florida Realtors FIRPTA addendum to the residential contract spells out what happens next. If the certificate arrives by closing, the buyer withholds the reduced amount. If it's still pending, the buyer withholds the full amount at closing and chooses either to send it to the IRS on time or to hold it in escrow, at the seller's expense, until the IRS decides.

What Can Go Wrong for the Buyer?

A seller who finds out late, a seller who comes up short, and a buyer who misses a deadline.

The trouble we see most often isn't the law – it's timing. Some foreign sellers don't hear about FIRPTA until the title company runs the numbers, a few days before closing. By then it's too late to get a withholding certificate, and 15% of the price is about to disappear from their proceeds. A surprised seller can stall, renegotiate or walk away.

The second problem is cash. If the mortgage payoff, closing costs and the withholding add up to more than the price, the money isn't there. The Florida Realtors FIRPTA addendum makes the seller bring the difference to closing, but a seller who can't wire it from abroad in time can still delay the closing. The buyer's own risks are the late filing, the missing seller TIN and, worst case, owing the tax that wasn't withheld.

Our guide for buyers from the UK and Canada covers the same rules from the seller's side.

What Should a Buyer Put in the Contract?

The FIRPTA addendum, initialed at the offer – and a timeline that fits it.

Florida Realtors publishes a FIRPTA addendum for its residential contract. Once both sides initial it, it covers the non-foreign certification, the reduced withholding if a certificate arrives, the escrow option if one is pending, the seller's duty to bring cash if the proceeds fall short, and the buyer's duty to give the seller copies of Forms 8288 and 8288-A. On top of the addendum, settle these early:

1. Ask at the offer whether the seller, or the owner behind the seller's LLC, is a foreign person.
2. Have the title company estimate the seller's net proceeds after withholding right away.
3. If the seller will apply for a withholding certificate, set a closing date that allows for it, or agree on the escrow agent and terms.
4. Agree on who prepares and files Forms 8288 and 8288-A, and who holds the money.

A Florida real estate attorney or the title company can tailor the terms.

Pros, Cons and Our Take

Pros

• A title company can prepare the forms, hold the funds and file for the buyer.
• The withholding is the seller's tax, not an added cost to the buyer.
• A withholding certificate can reduce the amount and smooth the closing.

Cons

• The buyer is legally responsible for withholding and can owe the tax if it's missed.
• The residence exceptions rarely fit a home bought to rent.
• A seller short on cash after withholding can delay or derail the closing.

Our Take

Find out at the offer whether the seller is foreign – including who's behind the LLC – initial the FIRPTA addendum, and get the seller's net proceeds estimated before anyone books movers. Most of the FIRPTA trouble we see starts with a seller who found out too late. Then let an experienced title company do the paperwork. The third party at the closing table never signs anything – make sure it gets paid on time anyway.

What Owners Should Know

• Keep copies of Forms 8288 and 8288-A and proof of payment with your closing file.
• If you claimed a residence exception, keep a record of the days you and your family used the home.

Official Sources

• IRS: FIRPTA withholding
• IRS: exceptions from FIRPTA withholding
• IRS: instructions for Forms 8288 and 8288-A
• IRS: about Form 8288-B
• 26 USC 1445: withholding on dispositions of US real property interests
• 26 CFR 1.1445-1: withholding on dispositions by foreign persons

David Myers is a licensed Florida real estate broker, working as a broker associate with Ziro Realty, and is not an attorney or tax professional. This article is general information, not legal or tax advice. Laws and local rules change; confirm current requirements with the county, the DBPR and a Florida attorney or tax professional.