FIRPTA Explained: What Foreign Buyers and Sellers in Seattle and Bellevue Need to Know
FIRPTA Explained: What Foreign Buyers and Sellers in Seattle and Bellevue Need to Know
It comes with forms, checkboxes, and real closing implications. Here's what FIRPTA actually is, why it's federal law rather than a Washington rule, and why it matters so much in Greater Seattle.
What Is FIRPTA and Does It Apply in Washington State?
FIRPTA, the Foreign Investment in Real Property Tax Act, is a federal law that requires a buyer to withhold a percentage of the sale price, generally 15%, when purchasing property from a foreign seller. It applies in every state, including Washington, and it comes up often in Greater Seattle because of how much foreign investment flows through this market. It's not a Washington-specific law. It's a federal rule that hits our market harder than most.
I Didn't Know What FIRPTA Was Either, Until I Had To
FIRPTA comes with forms. It comes with checkboxes. It comes with real tax and closing implications for both sides of the transaction. Here's what I would say about it to anyone who's never heard the term: I hadn't either, before I became a real estate agent. It's just not something you run into in every part of Washington.
Greater Seattle is a notable exception. We have a lot of foreign investors who choose to put their money into this market, and that's a great thing for real estate here. It also means agents like me have to pay close attention to the laws of disclosure, so our clients, buyer or seller, aren't caught off guard at closing.
FIRPTA Explained (And Why It's Federal, Not a Washington Law)
Let me be precise here, because this is a place where precision actually matters. FIRPTA is not a Washington State law. It's a federal law, the Foreign Investment in Real Property Tax Act, enacted by Congress in 1980 and codified at 26 U.S.C. Section 1445. It's administered entirely by the IRS, and it applies the same way in every single state.
What FIRPTA solves is a specific, practical problem for the IRS. When a foreign person sells U.S. real estate and then leaves the country, the IRS has a hard time collecting capital gains tax after the fact. So instead of chasing the seller, FIRPTA shifts the collection responsibility to the buyer. The buyer becomes what's called a withholding agent, required to hold back a percentage of the sale price and send it to the IRS.
How Much Gets Withheld, and When
This is the part that trips people up, so let's make it concrete.
| Sale Price | Buyer's Intended Use | Withholding Rate |
|---|---|---|
| $300,000 or less | Personal residence | 0% (exempt) |
| $300,001 to $1,000,000 | Personal residence | 10% |
| Over $1,000,000 | Any use | 15% |
| Any price | Not a residence (investment, rental, etc.) | 15% |
Rates current as of 2026 per Internal Revenue Code Section 1445 and current IRS guidance. Withholding is calculated on the gross sale price, not the seller's profit, and a seller with little or no actual gain can still have the full percentage withheld at closing.
The withholding gets remitted to the IRS within 20 days of closing, using IRS Form 8288. If a seller believes the standard withholding will be more than their actual tax liability, they can apply for a withholding certificate using Form 8288-B, ideally starting that process 90 days before closing, not the week of. And here's the part that should get every buyer's attention: if the buyer fails to withhold when required, the buyer becomes personally liable to the IRS for the uncollected tax, plus penalties and interest. This isn't optional paperwork. It's a real financial exposure if it's skipped.
Why This Matters So Much in Greater Seattle
Here's the honest take. A lot of agents in parts of this state can go years without touching a FIRPTA transaction. That's not the case here. Greater Seattle—including the market for the best luxury condos in Seattle and Bellevue's new-construction segment especially—sees a meaningful volume of foreign buyers and sellers, and that means FIRPTA disclosure has to be part of the conversation from the listing agreement or the buyer consultation forward, not something that gets discovered at the title company two weeks before closing.
If you're a seller specifically marketing to international buyers, I've written separately about that side of the business in Selling Your Home in Bellevue: How to Attract High-Net-Worth International Buyers. FIRPTA is the compliance piece underneath that conversation, not a replacement for it.
I'll be straight with you. I am not a CPA and I am not a tax attorney, and FIRPTA is exactly the kind of situation where I bring in the right professional rather than guess. My job is to flag it early, make sure the paperwork gets handled correctly, and make sure nobody, buyer or seller, gets surprised by a withholding line item they didn't see coming.
What I've learned is that the surprise is almost always avoidable. FIRPTA isn't complicated because the rule itself is confusing. It's complicated because it gets discovered too late in a transaction that was otherwise moving smoothly. Full stop, the fix is bringing it up on day one.
What Buyers and Sellers Should Actually Do
- If you're a foreign seller, talk to a CPA or tax attorney about whether a withholding certificate (Form 8288-B) makes sense for your situation, and start that conversation early, well before closing.
- If you're a buyer purchasing from a foreign seller, understand that you are the one legally responsible for withholding, and confirm with your closing agent and a tax professional exactly what rate applies to your specific transaction.
- If you're not sure whether your seller or buyer is a "foreign person" under the IRS definition, don't guess. This is a specific legal definition, and your closing agent or an attorney should confirm it.
- Either way, build the FIRPTA conversation into the transaction early. It should never be a surprise at the closing table.
Buying or Selling in a FIRPTA Situation?
Let's get ahead of it together, and connect you with the right tax professional before it becomes a closing-day surprise.
Talk to AaronFIRPTA is a federal law, not a Washington State one, but it shows up in Greater Seattle far more often than in most parts of the country because of how much foreign investment this market attracts. The standard withholding is 15% of the gross sale price, with reduced rates available for lower-priced residence purchases, and the buyer carries real legal exposure if withholding is skipped. The rule itself isn't complicated. Handling it early, with the right CPA or attorney involved, is what actually protects everyone at the closing table.
Frequently Asked Questions
What is FIRPTA and does it apply to Washington State real estate?
FIRPTA, the Foreign Investment in Real Property Tax Act, is a federal law that requires a buyer to withhold a percentage of the sale price when purchasing property from a foreign seller, and yes, it fully applies in Washington State, including Seattle and Bellevue. It is not a state-specific law. It applies the same way in every state, but it comes up especially often in Greater Seattle because of the region's high volume of foreign real estate investment.
How much does a buyer have to withhold under FIRPTA?
Under FIRPTA, a buyer must generally withhold 15% of the gross sale price when purchasing from a foreign seller. Reduced rates apply in specific cases: 0% if the sale price is $300,000 or less and the buyer will use the property as a residence, and 10% if the sale price is between $300,001 and $1,000,000 with residence use. Above $1,000,000, or for any non-residence purchase, the rate stays at 15% regardless of price.
Is FIRPTA a Washington State law or a federal law?
FIRPTA is a federal law, not a Washington State law. It was enacted by Congress in 1980, is codified at 26 U.S.C. Section 1445, and is administered entirely by the IRS. Washington does not have a separate state version of FIRPTA, but Washington real estate transactions are still fully subject to the federal law like every other state.
Are there exceptions to FIRPTA withholding?
Yes, there are exceptions to FIRPTA withholding. If the sale price is $300,000 or less and the buyer intends to use the property as a personal residence, withholding may be reduced to 0%. If the sale price is between $300,001 and $1,000,000 with the same residence-use intent, the withholding rate drops to 10% instead of the standard 15%. A seller can also apply for a withholding certificate using IRS Form 8288-B to reduce withholding to match their actual expected tax liability.
What happens if a buyer doesn't withhold FIRPTA taxes?
If a buyer fails to withhold the required FIRPTA amount from a foreign seller, the buyer becomes personally liable to the IRS for the uncollected tax, plus potential penalties and interest. This is why real estate agents and closing agents in markets with meaningful foreign investment, like Greater Seattle, pay close attention to FIRPTA disclosure and compliance at every closing involving a foreign seller.
Navigating a FIRPTA Transaction in Seattle or Bellevue?
I'll flag it early, walk you through what it means for your specific deal, and connect you with the right CPA or attorney. Let's meet you exactly where you are.
Talk to Aaron
