FIRPTA Explained: What DC Metro Home Sellers and Buyers Need to Know at Closing

Most real estate agents in suburban Maryland, Northern Virginia, and DC encounter FIRPTA at some point. Many encounter it more than they expect — and some are caught off guard when they do.

The DC metro area has one of the highest concentrations of international residents in the United States. Embassy staff, World Bank and IMF employees, federal contractors from abroad, diplomatic community members, and international investors make up a meaningful slice of the region's homeowning population. When any of those sellers goes to close a transaction, FIRPTA applies — and the consequences of ignoring it fall primarily on the buyer.

Here's what every agent and buyer in the DC metro needs to understand before a transaction involving a foreign seller reaches the closing table.

What FIRPTA Is

FIRPTA stands for the Foreign Investment in Real Property Tax Act. It is a federal law — enacted in 1980 and substantially amended in 1984 and 2016 — designed to ensure that when a foreign person sells U.S. real property, the IRS receives its share of the capital gains before the proceeds leave the country.

The core mechanism is a withholding requirement. When a foreign person sells U.S. real property, the buyer is required to withhold a percentage of the gross sale price and remit it to the IRS. The seller can later file a U.S. tax return and reclaim any overpayment, but the withholding obligation lands on the buyer — not the seller.

This is the piece that surprises many buyers and their agents. If you purchase a home from a foreign seller and fail to withhold and remit the required amount, the IRS can come after you — the buyer — for the unpaid tax. The fact that no one told you the seller was a foreign person is not a defense.

The Withholding Rate

Since the 2016 update, the standard FIRPTA withholding rate is 15% of the gross sale price. This is not 15% of the gain — it is 15% of the total sale price.

On a $700,000 sale, that is $105,000 withheld from the seller's proceeds and remitted to the IRS. The seller files a 1040-NR (or applicable return) to reconcile their actual tax liability, and the IRS refunds any overpayment — but that process takes months and requires the seller to have a U.S. taxpayer identification number.

There is also a reduced 10% rate available in limited circumstances involving smaller transactions and specific use conditions. The full structure is covered in the exemptions section below.

Who Withholds and Where the Money Goes

The withholding obligation sits with the buyer — more specifically, the buyer's agent in the transaction (which at closing is typically the settlement agent or title company). The buyer does not keep the money. It must be remitted to the IRS within 20 days of closing using IRS Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests) along with Form 8288-A.

The title company handles this remittance as part of the closing process when FIRPTA applies. Pruitt Title coordinates the withholding calculation, confirms the applicable rate and any exemption eligibility, and manages the IRS remittance — so buyers and their agents are not left navigating federal tax compliance on their own.

FIRPTA Exemptions

Not every transaction involving a foreign seller triggers withholding. Three main exemptions cover many residential transactions in the DC metro market.

Exemption 1: Sales under $300,000 where buyer intends primary residence use

If the sale price is $300,000 or less and the buyer (or a member of the buyer's family) intends to use the property as a principal residence for at least 50% of the time during the first two 12-month periods following the sale, no withholding is required. This exemption applies regardless of the seller's foreign status.

Exemption 2: Reduced withholding for sales between $300,001 and $1,000,000

If the sale price is over $300,000 but does not exceed $1,000,000, and the buyer plans to use the property as a primary residence, the withholding rate is reduced to 10% (not 15%). The buyer must provide a written declaration of intent to use the property as their principal residence.

Exemption 3: Withholding certificate from the IRS

The seller can apply to the IRS for a withholding certificate before or during the transaction. If the IRS grants a reduced withholding amount or full exemption (because the actual tax liability is lower than 15% would suggest), the buyer withholds only the amount specified in the certificate — or nothing if the certificate says zero. The seller typically works with a U.S. tax attorney or CPA to apply. These certificates take several weeks to process, so sellers who know FIRPTA applies should start early.

FIRPTA Withholding Scenarios

The FIRPTA Affidavit

In most residential transactions in the DC metro area, the seller is a U.S. person — a citizen or green card holder — and FIRPTA simply does not apply. To document that fact and protect the buyer from withholding liability, the seller signs a FIRPTA affidavit (formally called a Non-Foreign Person Affidavit or Certificate of Non-Foreign Status) at closing.

This is a short sworn statement certifying that the seller is not a foreign person under FIRPTA, including the seller's name, U.S. taxpayer identification number, and address. The buyer is entitled to rely on a signed affidavit — which shields the buyer from withholding liability if the affidavit turns out to be false (the liability then shifts to the seller).

If a seller refuses to sign a FIRPTA affidavit or cannot provide a U.S. taxpayer identification number, that is a strong indicator that FIRPTA withholding may be required.

Why This Comes Up More in the DC Metro Than Almost Anywhere Else

Washington DC regularly ranks among the top 5 U.S. metros for international population. Embassy row in NW DC, the Friendship Heights and Chevy Chase corridors popular with World Bank staff, the McLean and Vienna neighborhoods with high concentrations of diplomatic community members and international agency employees — these are not edge cases. They are mainstream seller categories that any active DMV agent will encounter.

International sellers may have purchased 10 or 15 years ago when they were posted to Washington, and now they are selling because their posting has ended. They may have green cards. They may have permanent resident status. They may be full U.S. citizens. Any of those statuses takes them out of FIRPTA coverage. But if their status is ambiguous, or if they held title as a foreign entity rather than as an individual, the withholding obligation may apply.

Agents who operate in these corridors regularly — and any agent who takes a listing in areas with heavy diplomatic or international institutional presence — owe it to their buyers to understand when to flag FIRPTA for the title company.

Pruitt Title's Role in FIRPTA Compliance

Pruitt Title handles FIRPTA compliance as a standard part of every closing. This means:

Verifying seller status at the outset of the transaction. Preparing the FIRPTA affidavit for U.S.-person sellers and coordinating signature. When withholding applies, calculating the correct withholding amount, retaining it from seller proceeds, completing IRS Forms 8288 and 8288-A, and remitting to the IRS within the required 20-day window.

Buyers working with Pruitt Title do not need to manage federal tax withholding compliance on their own. Agents do not need to become FIRPTA experts. The title company handles it — as long as everyone surfaces the relevant facts early in the transaction.

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