FIRPTA & Foreign Real Estate Investment
When a foreign person buys, holds, or sells U.S. real estate, FIRPTA changes the math: the buyer must withhold a share of the price at closing, and how the property is owned decides the tax and estate exposure. We structure foreign real estate investment before the purchase and clear FIRPTA at the sale.
Talk to an attorneyFounded
1965
Attorneys
11
AV-rated
Martindale-Hubbell
Office
Bellevue, WA
Founded
1965
Attorneys
4
AV-rated
Martindale-Hubbell
Office
Bellevue, WA
FIRPTA attorneys for Bellevue and Seattle foreign real estate investors
Oseran Hahn advises foreign individuals, families, and companies on U.S. real estate, with FIRPTA at the center of the analysis. We structure the ownership before a purchase to balance income tax, estate tax, and privacy; we plan for the FIRPTA withholding that hits at sale; we obtain withholding certificates to reduce or recover it; and we coordinate the real estate closing with the investor's broader immigration and tax picture. Much of this work is for Pacific Northwest property bought by families from China, Taiwan, Korea, and Japan, and the structure chosen at purchase determines what the sale and the next generation will cost.
Foreign real estate investment in the U.S. is governed by FIRPTA, and the cost of getting it wrong shows up at the sale and at death. We choose the ownership structure that fits the investor's goals; we explain how FIRPTA taxes the gain on a sale; we plan for and reduce the withholding the buyer must take at closing; we handle the withholding certificate that frees up over-withheld funds; and we address the estate-tax exposure that catches foreign owners by surprise.
Structuring the ownership
The first decision, made before the purchase, is how to hold the property: in the individual's name, through a U.S. or foreign LLC, a corporation, or a trust. Each choice trades off income-tax rates, estate-tax exposure, liability, privacy, and FIRPTA mechanics differently, and the right answer depends on whether the property is a residence, a rental, or a development. We model the options against the family's goals and pick the structure that holds up over the life of the investment, not just at closing.
How FIRPTA taxes a sale
The Foreign Investment in Real Property Tax Act treats a foreign person's gain on the disposition of a U.S. real property interest as income effectively connected to a U.S. trade or business, taxable under IRC §897. In plain terms, a foreign seller pays U.S. tax on the gain from selling U.S. real estate, the same as a domestic seller would, and must file a U.S. return to report it. We make sure the gain is calculated correctly, the basis and improvements are documented, and the return is filed, so the tax is the right number.
Withholding at closing
FIRPTA enforces the tax through withholding. Under IRC §1445, the buyer of U.S. real estate from a foreign person must generally withhold 15 percent of the entire amount realized, not the gain, and remit it to the IRS on Forms 8288 and 8288-A. A reduced rate or exemption can apply, for example when the buyer will use the property as a residence and the price is within statutory limits. We advise both buyers, who carry the withholding liability, and foreign sellers, who need the withholding handled correctly to avoid over-payment.
Withholding certificates and refunds
Because the 15 percent is taken on the gross price, it often far exceeds the actual tax on the gain. A foreign seller can apply for a withholding certificate on Form 8288-B, asking the IRS to reduce the amount withheld to the expected tax, ideally before closing. Done right, this keeps a large sum from being tied up with the IRS for a year. We prepare the certificate application, support it with the gain calculation, and pursue the refund when withholding has already occurred.
Estate tax and the next generation
The trap foreign owners least expect is U.S. estate tax. A non-domiciliary who dies owning U.S. real estate directly is exposed to U.S. estate tax on that property, with only a small exemption, far below the amount available to U.S. citizens. The ownership structure chosen at purchase is what manages this, often through a corporation or a carefully designed trust. We plan for the estate-tax exposure at the outset and coordinate it with the family's succession goals. This work overlaps our Real Estate practice; see International Real Estate Law for the transactional side.
More than forty years handling Pacific Northwest real estate for foreign families, with the tax and estate planning that has to go with it. We structure the purchase knowing what the sale and the next generation will cost.
Real estate and tax in one firm.
A foreign real estate purchase is a transaction and a tax-structuring decision at once. We handle the closing and the FIRPTA, estate, and entity planning together, so the deal and the structure agree.
We plan before the purchase.
The ownership structure decided at purchase governs the tax at sale and the estate exposure at death. Getting it right beforehand is far cheaper than restructuring a held property later.
Built for the documentation.
FIRPTA withholding, certificates, and returns are won on accurate numbers and timely filings. We prepare them in the form the IRS expects, which is what gets a withholding certificate approved before closing.
The attorneys behindthe work.
Our business and corporate attorneys handle this work alongside our litigation team, so you have coverage whether your matter stays transactional or becomes something more.
What clientsask us first.
What is FIRPTA, in plain terms?
FIRPTA is the U.S. law that taxes a foreign person's profit on selling U.S. real estate and enforces it by making the buyer withhold part of the price at closing. It does not add a special tax so much as make sure a foreign seller actually pays the U.S. tax on the gain, the way a U.S. seller would.
How much does the buyer have to withhold?
Generally 15 percent of the entire sale price, not just the profit, remitted to the IRS on Forms 8288 and 8288-A. A lower rate or an exemption can apply, such as when the buyer will live in the property and the price is within statutory limits. Because the withholding is on the gross price, it often exceeds the real tax.
Can I avoid having so much withheld?
Often, yes. A foreign seller can apply to the IRS for a withholding certificate on Form 8288-B, asking that the amount withheld be reduced to the actual expected tax on the gain. Filed correctly and early, it keeps the excess from being locked up with the IRS for a year. If withholding already happened, we pursue the refund.
How should I hold U.S. real estate as a foreign buyer?
It depends on your goals. Holding in your own name, an LLC, a corporation, or a trust each affects income tax, estate tax, liability, and privacy differently. There is no single best answer, which is why the structure should be chosen before the purchase, with the sale and estate consequences in view. We model the options for your situation.
Will my heirs owe U.S. estate tax on the property?
They can, and it surprises many foreign owners. A non-U.S. person who dies owning U.S. real estate directly faces U.S. estate tax with only a small exemption, far below a citizen's. The right ownership structure, set up at purchase, is how this is managed. We plan for it alongside your succession goals.
Recentarticles.
Tell us about the property and who will own it, ideally before you are under contract. A foreign investment attorney will follow up within one business day, and the first conversation is confidential.
Oseran Hahn P.S. · 11225 SE 6th St, Suite 100 · Bellevue, WA 98004
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