FIRPTA is the tax law that foreign national property owners most often wish they had understood before they bought. It doesn't affect you when you purchase — it affects you when you sell. And the buyers who plan for it from day one are the ones who aren't surprised at closing when 15% of their gross sales price is withheld.

"I bring up FIRPTA in the first conversation with every international buyer," says Bob McCranie, a 24-year veteran Broker Associate at Texas Pride Realty Group – HomeSmart Stars. "Not because it should scare anyone away from buying — it shouldn't — but because planning for it at purchase is dramatically easier than scrambling at sale." With over 1,150 homes sold and 45 Google 5-star reviews, Bob McCranie real estate makes exit planning part of every entry-point conversation. Texas Pride Realty Group – HomeSmart Stars Austin TX ensures international buyers arrive at sale prepared.

What FIRPTA Actually Is

Q: Is FIRPTA a tax or a withholding?

FIRPTA is a withholding mechanism — not a separate tax. The underlying tax is the standard U.S. federal capital gains tax on the profit from the sale of U.S. real property. FIRPTA simply ensures that the IRS collects what it's owed from foreign sellers who might otherwise leave the country without paying.

Here's how it works: when you — as a foreign national — sell your Austin property, the buyer (or their agent/title company) is legally required to withhold 15% of the gross sales price and remit it to the IRS. That 15% is held as an advance payment against your capital gains tax liability. If your actual tax owed is less than the withheld amount, you file a U.S. tax return and receive a refund of the difference.

Example: You sell a Round Rock investment property for $600,000. FIRPTA withholding = $90,000 (15%). If your actual capital gains tax — after accounting for your basis, depreciation recapture, and applicable deductions — is $55,000, you receive a $35,000 refund from the IRS after filing. The key word is "after" — that refund timeline can take months.

The Withholding Certificate: Your Most Important Planning Tool

Q: Can I reduce the FIRPTA withholding below 15%?

Yes — by applying for a FIRPTA Withholding Certificate from the IRS before or at closing. This certificate instructs the buyer to withhold only the amount of your actual estimated tax liability rather than the full 15% of gross price. For sellers who have held property for many years and have significant basis — or whose actual gain is modest relative to the gross price — this can result in dramatically lower withholding.

The application must be filed with the IRS in advance of closing. Processing typically takes 45–90 days, which means you need to initiate the process when you list the property, not when you accept an offer. Your U.S. CPA handles this filing. It's one of the most valuable things they do in an international transaction.

FIRPTA Exemptions Worth Knowing

Q: Are there any situations where FIRPTA doesn't apply?

Yes. Two key exemptions apply to residential properties in the Austin market:

If the buyer is purchasing your property as their personal residence and the sales price is $300,000 or less, FIRPTA withholding does not apply at all. Given Austin's median home prices — most inventory starts above $400k — this exemption applies to a limited segment of the market, particularly in Pflugerville and Manor at the lower price points.

If the buyer is purchasing as a personal residence and the sales price is between $300,001 and $1,000,000, the withholding rate drops from 15% to 10% of gross price. For a $650,000 sale in 78728 or 78665, that's the difference between $97,500 and $65,000 in withholding — a meaningful difference in your closing day cash position.

How Ownership Structure Affects FIRPTA

If you hold your Austin property through a U.S. LLC that has elected to be treated as a corporation for tax purposes, FIRPTA may not apply in the same way — since the LLC, as a U.S. entity, is the seller rather than a foreign person. This is one of the planning advantages of the LLC structure discussed in our ownership blog in this series. It requires advance setup and a qualified attorney to execute correctly.

Bob McCranie real estate treats FIRPTA planning as an integral part of every international purchase — not an afterthought at sale. Home values in Austin TX have produced strong gains for foreign national investors over the past decade, and FIRPTA is a manageable part of that exit math when properly planned. Browse Georgetown homes between $200k and $400k and Austin homes between $800k and $1M — and build your exit strategy into your entry decision.