Canadian Selling Florida Real Estate: FIRPTA Withholding, the Withholding Certificate, Form 8288-B, and the Canadian Return

A Canadian selling U.S. real estate meets the Foreign Investment in Real Property Tax Act at the closing table. The withholding: the buyer of a U.S. real property interest from a foreign person must withhold 15 percent of the amount realized (the gross sale price — not the gain) and remit it to the IRS within twenty days of the closing on Forms 8288 and 8288-A (the buyer's obligation — in practice the closing agent or title company handles it); the buyer who fails to withhold is liable for the tax; the seller receives the proceeds less the withholding. The reduced rates and the exception: a sale of a residence the buyer will use as a residence, for US$1 million or less, is subject to 10 percent withholding; a sale for US$300,000 or less to a buyer who will use it as a residence is exempt from withholding (in both cases the buyer or a family member must have definite plans to live there at least half the days it is used in each of the first two years — closing agents usually take a signed buyer's statement); above US$1 million, 15 percent. The withholding certificate — Form 8288-B: the seller (or the seller's agent) applies to the IRS for a withholding certificate that reduces the withholding to the seller's maximum tax liability on the gain (computed on the application — the sale price, the adjusted basis, the depreciation taken, the resulting gain and the tax at the nonresident's rates); if the application is submitted before or at the closing, the closing agent withholds the 15 percent but holds it in escrow (instead of remitting it) until the IRS responds, then remits the reduced amount and releases the balance to the seller (the regulations let the withheld amount be held until the 20th day after the IRS's final determination, provided the application was submitted by the closing date and the buyer was notified in writing); the IRS takes ninety days or more to process (often longer); the seller needs a U.S. taxpayer identification number (an ITIN — the Canadian ITIN guide's U.S. counterpart, the W-7 — the ITIN cost guide) to apply, and the ITIN application can accompany the 8288-B. The U.S. return — Form 1040-NR: the seller files a U.S. nonresident return for the year of the sale reporting the gain (sale price less adjusted basis — the purchase price plus improvements, less the depreciation allowed or allowable if the property was rented), taxed at the U.S. rates (long-term capital gain rates for property held more than a year; the depreciation portion as unrecaptured section 1250 gain at up to 25 percent — the depreciation recapture guide), with the FIRPTA withholding as a credit on the return — refunded to the extent it exceeds the actual tax; a Canadian who rented the property and never filed U.S. returns (the snowbird guide's 871(d) election) finds the "allowed or allowable" rule reduces the basis by the depreciation they could have taken even if they didn't — and the late returns for the rental years are part of the sale's cleanup; a jointly owned property is split between the owners, each filing their own 1040-NR with their share of the withholding (each Form 8288-A copy names a seller). The state: Florida has no personal income tax — no state return for an individual seller (the Florida corporate income tax guide covers a corporate seller); other income-tax states have their own nonresident withholding or estimated-payment rules on real estate sales — California and New York among them. The Canadian return: a Canadian resident is taxed on worldwide income — the gain on the Florida property is a capital gain in Canada (one-half — the proposed increase to two-thirds was cancelled in March 2025), computed in Canadian dollars (the purchase converted at the rate on the purchase date and the sale at the rate on the sale date — the ACB guide's currency point, which can make the Canadian gain larger or smaller than the U.S. gain), with a foreign tax credit for the U.S. tax actually paid (not the FIRPTA withholding — the credit is for the final U.S. tax on the 1040-NR); if the property was a principal residence for the Canadian (a vacation home, including one outside Canada, qualifies for any year in which the family ordinarily inhabited it, though a family can designate only one property per year), the principal residence exemption may shelter the Canadian gain for the designated years, while the United States taxes the whole gain — the credit then has less Canadian tax to offset; the sale is reported on Schedule 3 and the principal residence designation on Form T2091 if claimed; and the property's removal from T1135 (the T1135 guide) the following year. Depreciation recapture in Canada: a rented property on which the Canadian claimed capital cost allowance (the T776 guide's CCA) has recapture of the CCA as ordinary income in Canada on the sale — while the U.S. taxes its own depreciation as unrecaptured section 1250 gain; the two countries' depreciation histories differ (the U.S. requires it — allowed or allowable; Canada makes it optional). The estate case: a Canadian who dies owning Florida property faces the U.S. estate tax (the snowbird guide's estate tax point — the treaty's prorated credit) and the Canadian deemed disposition on the final return (the inheritance guide), with the estate's later sale subject to FIRPTA as well. The bookkeeping: the purchase closing statement and every improvement's receipt (the basis); the depreciation claimed on U.S. returns (or allowable) and CCA claimed on Canadian returns; the ITIN; Form 8288-B with the closing agent's escrow; Form 1040-NR for the sale year (and delinquent rental years); the Canadian Schedule 3 with the foreign tax credit and the principal residence designation if applicable. The errors: no withholding certificate — 15 percent of the sale price held by the IRS for a year or more when the actual tax was a fraction of it; no ITIN applied for in time; the rental years' U.S. returns never filed (the allowable depreciation reducing basis anyway); the Canadian foreign tax credit claimed on the FIRPTA withholding rather than the final tax; and the currency conversion done once at the sale date instead of at each transaction's date.

Key takeaways

• The buyer withholds 15 percent of the gross sale price from a foreign seller (10 percent for a residence to be used by the buyer at US$1 million or less; none at US$300,000 or less with the buyer's residence use) and remits it on Forms 8288 and 8288-A.
• A withholding certificate (Form 8288-B) filed by the closing lets the agent escrow the withholding and remit only the seller's actual maximum tax once the IRS responds — the seller needs an ITIN to apply.
• The seller files Form 1040-NR for the sale year: capital gain rates, unrecaptured section 1250 gain on depreciation allowed or allowable, and the withholding credited and refunded.
• Florida has no personal income tax on the gain; other states may withhold their own.
• Canada taxes the gain in Canadian dollars at each transaction's exchange rate, with a foreign tax credit for the final U.S. tax, CCA recapture if claimed, and a possible principal residence designation that shelters the Canadian gain but not the U.S. one.
• Late U.S. returns for rental years are part of the cleanup — the allowable depreciation reduces basis whether or not it was claimed.

The Canadian seller's Florida sale file

Basis: purchase closing statement, improvements, U.S. depreciation allowed or allowable. ITIN (apply early). Form 8288-B filed by closing; escrow arranged with the closing agent. Form 1040-NR for the sale year; delinquent rental-year returns. Canadian side: gain in Canadian dollars by transaction date; CCA recapture; principal residence designation (T2091) if applicable; Schedule 3; foreign tax credit on the final U.S. tax; T1135 removal. The 8288-B at closing is the item that decides whether the seller waits a year for their money.

Worked example

A Montreal couple sells their Boca Raton condo for US$620,000, bought in 2012 for US$280,000 with US$40,000 of improvements, rented for the six months they weren't there each year since 2016 (US$62,000 of depreciation allowable — they had filed Forms 1040-NR with the 871(d) election and claimed it). The buyer will use it as a residence at under US$1 million — 10 percent withholding: US$62,000. Their U.S. gain: US$620,000 less (US$320,000 − US$62,000) = US$362,000 — of which US$62,000 is unrecaptured section 1250 gain; their combined U.S. tax (long-term rates plus the 25 percent maximum on the depreciation portion, split between two returns) is about US$47,000 (part of each spouse's gain falls in the 0 percent and 12 percent brackets) — about US$15,000 under the withholding, so they skip the certificate and recover the difference on their 1040-NRs. Their friends selling a US$1.4 million Miami Beach condo bought in 2019 for US$1.25 million (15 percent withholding: US$210,000, against an actual tax of about US$8,000 on their US$150,000 gain split between two returns) file Form 8288-B two weeks before closing with their ITINs already in hand; the closing agent escrows the US$210,000 and remits the reduced amount when the certificate arrives four months later. In Canada, the first couple's gain is computed in Canadian dollars (the 2012 purchase at 1.00, the 2026 sale at 1.37 — a Canadian gain larger than the U.S. one because of the exchange rate), with the CCA they'd claimed recaptured as income and the final U.S. tax as a foreign tax credit on Schedule 3; the condo comes off their T1135.

Official sources

The IRS explains: “The transferee must deduct and withhold a tax on the total amount realized by the foreign person on the disposition. The rate of withholding generally is 15% (10% for dispositions before Feb. 17, 2016).” — Internal Revenue Service, FIRPTA withholding, https://www.irs.gov/individuals/international-taxpayers/firpta-withholding

Publication 597 explains: “Treaty provisions are generally reciprocal (the same rules apply to both treaty countries). Therefore, Canadian residents who receive income from the United States may also refer to this publication to see if a treaty provision affects their U.S. tax liability.” — Internal Revenue Service, Publication 597 (10/2015), Information on the United States–Canada Income Tax Treaty, https://www.irs.gov/publications/p597

Practitioner note

A Canadian selling Florida real estate meets FIRPTA at the closing table — 15 percent of the gross price withheld, often many times the real tax on the gain — and the difference between getting the excess back in four months and in eighteen is a Form 8288-B filed before the closing, with the ITIN already in hand. Our desks compute the seller's maximum tax for the certificate, arrange the closing agent's escrow, file the Form 1040-NR (and any delinquent rental-year returns the allowable depreciation makes necessary), and carry the gain to the Canadian return in Canadian dollars with the foreign tax credit on the final U.S. tax — not the withholding.

See also: For related guidance, see selling U.S. property as a Canadian: FIRPTA withholding and the capital gains on a Canadian's U.S. property sale; and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk and Canadian Tax Desk handle Canadian sellers of U.S. real estate — FIRPTA withholding analysis, Form 8288-B withholding certificates and closing escrow coordination, ITIN applications, Form 1040-NR sale-year and delinquent rental returns, depreciation recapture in both countries, Canadian capital gains with currency conversion, principal residence designations, and foreign tax credits. See pricing or book a call.