FIRPTA — WHAT YOU NEED TO KNOW

FIRPTA — WHAT YOU NEED TO KNOW

For international homeowners in Washington, D.C.—particularly those affiliated with the World Bank or International Monetary Fund—selling property involves more than just finding the right buyer. If you hold a G4 visa, your residency status for tax purposes can trigger the Foreign Investment in Real Property Tax Act (FIRPTA).

FIRPTA is not a tax itself, but a mandatory withholding used by the IRS to ensure foreign sellers fulfill their U.S. income tax obligations. Understanding how this affects your liquid proceeds at closing is the difference between a smooth transition and a financial headache.

Frequently Asked Questions

What exactly is the withholding amount? Standard FIRPTA withholding is 15% of the gross sales price. Note that this is based on the total sale amount, not your net profit. For a $1,000,000 home, $150,000 is sent directly to the IRS at closing.

Does my G4 visa status exempt me? Not automatically. While G4 visa holders are often "non-resident aliens" for income tax, the IRS "Substantial Presence Test" or your intent to remain in the U.S. can complicate your status. If you are considered a foreign person at the time of sale, FIRPTA applies.

Can I reduce the amount withheld? Yes, by applying for a Withholding Certificate (Form 8288-B). If you can prove your actual tax liability will be less than 15%, the IRS may allow a reduced withholding. However, this must be filed on or before the date of closing.

When do I get my money back? If the withheld amount exceeds your actual tax due, you must file a U.S. tax return the following year to claim a refund. Because of this lag, advanced planning is essential to ensure you have the liquidity needed for your next move.

The Bottom Line: Don’t wait until you have a contract in hand. Consult with a tax professional early to determine your status and avoid surprises at the settlement table.