I’m a foreign seller. What is FIRPTA withholding?

FIRPTA, the Foreign Investment in Real Property Tax Act, requires that when a foreign person sells U.S. real estate, a percentage of the gross sale price be withheld and remitted to the IRS as a prepayment toward any capital gains tax owed. The buyer is legally responsible for the withholding, but in practice the title and settlement company facilitates it at closing by collecting the required amount and handling the paperwork. Exemptions and reduced-withholding certificates can apply depending on the sale price and the buyer’s intended use of the property. Kootenai Title Company coordinates FIRPTA withholding at closing and works with the parties’ tax advisors so the requirement is handled correctly.