How we help
- FIRPTA withholding rate analysis (0% / 10% / 15% tiers)
- Form 8288 / 8288-A withholding agent compliance
- Withholding-certificate applications (Form 8288-B) to reduce hold-back
- Form 1040-NR preparation for the actual gain calculation
- Refund-claim filing where withholding exceeds the actual tax
- Coordination with Canadian capital-gains and foreign-tax-credit positions
The FIRPTA mechanic
The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) imposes withholding on the disposition of US real-property interests by foreign persons. The withholding is a US federal obligation imposed on the BUYER (or the closing agent acting for the buyer) — not the seller. The withheld amount is sent to the IRS and credited against the foreign seller's actual US tax liability when they file Form 1040-NR.
The withholding rate is generally 15% of the gross sales price. Two reductions are available:
- 0% — primary residence under US$300,000. If the buyer (or a family member) intends to use the property as a personal residence and the sale price is US$300,000 or less, no withholding is required.
- 10% — primary residence under US$1,000,000. If the personal-residence intention exists and the price is between US$300,001 and US$1,000,000, withholding drops to 10%.
The cash problem
15% of the gross sale price almost always exceeds the actual US tax owed on the gain (which is computed on the gain, not the gross). A Canadian who paid US$500,000 for a Florida condo in 2018 and sells it for US$700,000 in 2024 has a US$200,000 gain and a US federal tax bill of roughly US$30,000 (at 15% long-term capital-gains rate). FIRPTA withholding at 15% of the gross US$700,000 is US$105,000 — more than three times the actual tax.
The seller files Form 1040-NR after year-end to report the actual gain, claim foreign tax credits where applicable, and request a refund of the over-withholding. Refund processing typically takes 6–12 months, sometimes longer.
Reducing withholding at closing — Form 8288-B
The seller can apply to the IRS for a withholding certificate under IRC section 1445(c)(3), using Form 8288-B. If the application is approved before closing, the buyer can withhold the reduced amount specified in the certificate instead of the default 15%. The application must show the actual expected tax based on the seller's gain calculation and any treaty positions.
Processing time for Form 8288-B is typically 60–90 days. Submitting early in the listing process — before a purchase agreement is signed — gives the cleanest path to a closing without surplus withholding.
The Canadian side
For a Canadian-resident seller, the gain is also taxable in Canada as a capital gain. The Canada-US treaty allocates primary taxing rights to the US (where the real estate is located), and Canada provides a foreign tax credit for the US tax actually paid. Coordinating the US 1040-NR with the Canadian T1 in the year of sale — particularly with respect to FX translation of the gain and the timing of the foreign tax credit — is essential to avoid the gain being economically taxed twice.
How we work the file
Pre-closing, we model the gain, prepare Form 8288-B to reduce the FIRPTA withholding at closing, and coordinate with the closing agent. Post-closing, we file Form 1040-NR to report the gain and either confirm the reduced withholding or claim the over-withholding refund. The Canadian-side T1 is filed in coordination with the US position.
What to expect when you call us
Your first call is a free, no-obligation consultation with a tax lawyer. We will review the details of your situation, explain your options under the Income Tax Act and CRA administrative practice, and give you a clear, fixed-fee quote if you choose to retain us. Your consultation is confidential, and once we are retained, communications are protected by solicitor–client privilege.
If you retain us, we begin work within 24 hours of being retained.
Frequently asked questions
Is the consultation really free?
Yes. Most cases qualify for a free, no-obligation consultation with one of our tax lawyers. During the call we'll review your situation, explain your options, and give you a clear quote if you decide to retain us.
Do you serve all of Canada?
Yes. Barrett Tax Law represents clients across Canada. We have offices and local phone lines in Toronto, Calgary, Edmonton, Fort McMurray, Ottawa, Vancouver, and Winnipeg, plus a national toll-free line at 1-877-882-9829.
What does a tax lawyer do that an accountant cannot?
Accountants prepare returns and financial statements. Tax lawyers represent you when those returns are challenged, audited, or prosecuted — and our communications are protected by solicitor–client privilege, which accountant communications generally are not.
Will the CRA criminally prosecute me?
Most CRA disputes are civil. Criminal prosecution is reserved for serious tax evasion or fraud, usually involving deliberate misrepresentation. If you have unreported income, a voluntary disclosure is one of the standard ways to reduce criminal-prosecution risk.
How fast can you start on my case?
We typically begin work within 24 hours of being retained. For audit deadlines, Notices of Objection, and other time-sensitive matters, we move immediately.
What if I have unfiled tax returns from many years ago?
We routinely handle 5+ years of unfiled returns. Through the Voluntary Disclosures Program — applied for before the CRA contacts you — we can usually eliminate gross-negligence penalties and limit interest exposure.