Selling US property as a Canadian? FIRPTA takes 15% of the price — not the gain
Non-residents selling US real estate face 15% withholding on the GROSS sale price under FIRPTA — often far more than the actual tax, withheld even when you sell at a loss. We reduce it before closing with a Form 8288-B withholding certificate, and recover the rest after with the 1040-NR refund return — with the Canadian side of the same sale handled in the same engagement.
✓ 8288-B before closing ✓ Refund return after ✓ Both countries, one team
A withholding regime aimed at sellers who leave the country
FIRPTA — the Foreign Investment in Real Property Tax Act, IRC §1445 — solves a collection problem: the IRS can’t easily chase a non-resident seller after closing, so it deputizes the buyer. On most sales, the buyer must withhold 15% of the gross purchase price and remit it to the IRS within 20 days of closing, on Forms 8288 and 8288-A.
Read that carefully: gross, not gain. A $700,000 Florida condo sale parks $105,000 with the IRS regardless of what you paid for it — even if the sale is at a loss — unless the withholding is reduced before closing. The machinery to reduce it, and to recover the excess, is the whole point of this service.
The paperwork that decides where your money sits
Form 8288 — the buyer’s remittance
The transmittal the buyer files to send the withheld tax to the IRS — due, with the money, within 20 days of closing. Buyers’ agents enforce this strictly, because a buyer who fails to withhold becomes liable personally.
Form 8288-A — your withholding statement
The per-seller slip recording how much was withheld from you. The IRS stamps Copy B and returns it — and that stamped copy is what your refund claim rides on. If it never arrives or doesn’t match, the refund stalls.
Form 8288-B — the withholding certificate
The application to reduce or eliminate the withholding, based on the actual expected tax. It must be filed on or before closing; the IRS takes roughly 90 days, and the funds sit in escrow with the closing agent while it’s pending — instead of at the IRS for a year.
Where the 15% comes down
The $300,000 residence exception
No withholding where the price is $300,000 or less AND the buyer intends to use the property as a residence at least 50% of the time for the first two years. It turns on the buyer’s plans and signed statements — not something a seller can assume.
The reduced 10% band
Sales between $300,000 and $1,000,000 that meet the same buyer-residence test withhold at 10% instead of 15%.
The withholding certificate
For everything else, Form 8288-B — filed before closing — asks the IRS to cap withholding at the actual expected tax on the gain. Processing runs roughly 90 days; done right, the closing agent holds the funds in escrow until the certificate lands, instead of wiring them to the IRS.
The ITIN comes first
Both the 8288-B application and the refund return require a US taxpayer identification number — and most Canadian sellers don’t have one. The Form W-7 ITIN application is prepared alongside the FIRPTA paperwork, so the number, the certificate, and the refund move as one file instead of three separate waits.
How the money actually comes back
The stamped 8288-A
The IRS processes the buyer’s withholding filing and stamps Copy B of your 8288-A. That stamped copy is the evidence your refund rides on — we confirm it exists and matches the closing numbers.
Form 1040-NR for the sale year
The following filing season, your non-resident return reports the actual gain, computes the real tax, and claims the withheld amount as a credit. The difference comes back as a refund — typically several months after filing.
The Canadian return — the piece most firms miss
The same sale must be reported in Canada, and the treaty does NOT exempt US real estate gains. What saves you from double tax is the foreign tax credit for the US tax actually paid — which only computes correctly when both returns are prepared together, by people looking at the same numbers. One firm, both returns — the same way we run our cross-border practice.
Florida closings, Canadian sellers
This file walks through our door with a Florida address on it: Canadians selling the condo after years of winters, snowbirds exiting the market, families selling an inherited vacation home. The pattern is always the same — a closing date moving faster than IRS paperwork, a closing agent asking about FIRPTA, and 15% of the price about to leave the room. The earlier the call, the more of that money stays in escrow instead of Washington.
One package, both sides of the border
Your exact fee is quoted and fixed in writing before any work begins.
Final quote confirmed in writing before any work begins. No hidden fees.
FIRPTA Package
The whole sale, both countries, one engagement
- Form 8288-B withholding-certificate application, filed before closing
- Form W-7 / ITIN application where needed
- Escrow coordination with the closing agent while the certificate is pending
- Form 1040-NR refund return with the stamped 8288-A credited
- Canadian-side reporting and foreign tax credit coordination
FIRPTA questions, answered straight
Is the 15% FIRPTA withholding my final tax?
No — it’s a prepayment, withheld from the gross price to make sure the IRS gets paid. Your actual tax is computed on the gain when you file Form 1040-NR for the sale year. If the withholding exceeds the real tax — it usually does — the difference comes back as a refund.
What if I sell at a loss?
The buyer must still withhold 15% of the gross price unless the withholding is reduced first. A Form 8288-B withholding certificate, filed before closing, is how a loss sale avoids parking six figures with the IRS for a year — and the refund return recovers whatever was withheld anyway.
How do I get the 15% back?
Two routes, usually combined: a Form 8288-B withholding certificate before closing reduces what gets taken in the first place, and the Form 1040-NR you file for the sale year reports the actual gain and claims back the excess — supported by the stamped Copy B of Form 8288-A. Without that stamped copy, refunds stall; we make sure it exists and matches.
When must Form 8288-B be filed?
On or before the closing date — that timing is what lets the funds sit in escrow at the closing agent instead of going to the IRS while the certificate (roughly 90 days of processing) is pending. After closing, the reduction window is gone and you’re in refund-only territory.
Do I need an ITIN first?
Yes — both the 8288-B application and the 1040-NR refund return require a US taxpayer identification number. If you don’t have one, the Form W-7 ITIN application is prepared alongside the FIRPTA paperwork as one package.
Doesn’t the Canada–US treaty exempt me?
No. The treaty explicitly preserves each country’s right to tax real estate situated on its own soil, so US real property gains are US-taxable for Canadians. What the treaty system does provide is a foreign tax credit on the Canadian side — which only works if both returns are prepared to line up.
Selling with a closing date on the calendar?
The 8288-B has to beat your closing. Book a free 15-minute call and we’ll map the withholding, the certificate, and both countries’ returns before the clock runs.
The content on this page is for informational purposes only and does not constitute professional tax advice. FIRPTA withholding requirements depend on individual facts and circumstances and are subject to change. See our full legal disclaimer.