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FIRPTA for Canadian Sellers: The 15% Withholding Explained
FIRPTA withholding: 15% of gross sale price on every Canadian-owned US property sale. $600K sale = $90,000 withheld. Withholding certificate can reduce. Owner-occupancy exception under $300K. Own Luxury Homes® International Buyer Verification Standard™ FIRPTA specialist guidance.
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FIRPTA for Canadian Sellers: The 15% Withholding Explained
15%
FIRPTA withholding rate on gross sale price for Canadian sellers of US property
$60,000
Threshold below which FIRPTA withholding may not apply (low-value exception)
21 Days
Time for IRS to process a withholding certificate to reduce the 15%
Treaty
US-Canada tax treaty provides some estate tax relief but not FIRPTA exemption
FIRPTA — the Foreign Investment in Real Property Tax Act — requires that when a Canadian (or any non-US person) sells US real estate, the buyer must withhold 15% of the gross sale price and remit it to the IRS. On a $600,000 Florida condo, that is $90,000 withheld at closing. This is a prepayment of tax, not a penalty. If the Canadian seller’s actual tax liability is less than 15% of gross proceeds, a withholding certificate can reduce or eliminate the withholding.
Own Luxury Homes® — International Buyer Verification Standard™
Own Luxury Homes® specializes in representing international buyers of US real estate. Our International Buyer Verification Standard™ confirms every agent’s cross-border transaction experience, FIRPTA knowledge, foreign national mortgage familiarity, and currency transfer protocol before assignment. No dual agency. Full buyer representation. Contact us now.
How FIRPTA Works Step by Step
(1) Canadian sells US property. (2) Buyer’s attorney/title company withholds 15% of gross price at closing. (3) Withheld amount is remitted to IRS using Form 8288 and 8288-A within 20 days of closing. (4) Canadian seller files a US non-resident tax return (Form 1040NR) reporting the actual gain and claiming the withheld amount as a credit. (5) If actual tax due is less than the amount withheld, IRS issues a refund.
The Withholding Certificate: How to Reduce the 15%
If the actual US tax liability on the gain is less than 15% of gross proceeds, the Canadian seller can apply to the IRS for a withholding certificate before closing. The withholding certificate reduces or eliminates the withholding to match the actual liability. Processing time is approximately 21 days once the application is complete. Key situations where this matters:
(1) Low-gain sales: if the property has appreciated little, actual tax due is much less than 15% of gross. (2) Sale at a loss: no US tax liability; certificate eliminates withholding. (3) 1031 exchange: special FIRPTA withholding rules apply; timely filing is critical.
FIRPTA Exceptions for Canadians
| Exception | Condition | Withholding |
|---|---|---|
| Low-value personal residence | Sale price under $300K and buyer will occupy as residence | Exempt |
| Sale price $300K–$1M + owner-occupancy | Buyer certifies they will occupy as primary/secondary | 10% (not 15%) |
| Non-foreign status | Canadian has US green card or is a US citizen | No FIRPTA |
| Withholding certificate | IRS approves reduced withholding before closing | Reduced to actual liability |
Ownership Structure and FIRPTA Planning
The ownership structure chosen at acquisition significantly affects FIRPTA at sale. (1) Individual ownership: full 15% withholding applies. (2) Canadian corporation: FIRPTA may still apply depending on whether the corporation qualifies as a foreign person. (3) US LLC: if treated as a disregarded entity owned by a foreign person, FIRPTA applies. (4) US corporation: FIRPTA does not apply to the sale of a US corporation’s stock in most cases. Own Luxury Homes® recommends Canadians consult a US-Canada cross-border tax specialist before choosing an ownership structure.
Ryan Brown, Principal Broker & CEO — Own Luxury Homes®
“The Canadian seller who learns about FIRPTA at closing is the one I feel worst for. $90,000 withheld on a $600,000 sale — money they were expecting to receive that day. The withholding certificate process works, but you need to start it 6–8 weeks before closing. My job is to make sure every Canadian buyer I work with knows this before they list, not the week of closing.”
Own Luxury Homes® — Canadian buyer specialists with FIRPTA planning guidance in every US market. International Buyer Verification Standard™. Contact us now ›
"The introduction Own Luxury Homes® makes is to a specialist with documented closing history in your specific market — not the county, not the metro, the submarket you're actually selling or buying in. That's the standard we verify before your name goes anywhere."
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes® (FL License BK3626873)