Glossary
FIRPTA
Foreign Investment in Real Property Tax Act
FIRPTA requires the buyer of US real property from a foreign person to withhold tax — generally 15% of the gross sale price — and remit it to the IRS at closing. It is a withholding on the sale, not a final tax: the seller files a US return and credits or refunds it against the actual gain.
Who it applies to: A non-resident (e.g., a Canadian) selling US rental property.
Key facts
- Rate
- Generally 15% of the gross sale price
- When
- Withheld by the buyer at closing
- Final tax?
- No — reconciled on a US return
How it works
- At closing, the buyer withholds roughly 15% of the gross sale price and remits it to the IRS.
- It is a prepayment, not the final tax — the actual tax is on your gain, usually far less.
- You file a US return to reconcile and recover the difference, or apply for a reduced-withholding certificate.
Related terms
Schedule E
The IRS form for reporting supplemental income and loss, including rental real estate — where a Canadian reports a US rental's income and expenses.
T1135
The form Canadian residents file to report specified foreign property — such as a US rental — when its total cost exceeds C$100,000 at any point in the year.
FBAR
A US Treasury (FinCEN) report of foreign financial accounts, required of US persons whose foreign accounts exceed US$10,000 in aggregate at any time in the year.
Frequently asked questions
How much is FIRPTA withholding?
Generally 15% of the gross sale price of the US real property, withheld by the buyer and remitted to the IRS at closing. Reduced rates or exemptions can apply for certain lower-priced or owner-occupied sales.
Is FIRPTA the final tax on my US property sale?
No. FIRPTA is a withholding against the eventual tax on your gain. You file a US tax return to compute the actual tax and recover any over-withheld amount — often a substantial refund.
This definition is general information, not tax advice. See the full guide above and verify current rules with the CRA or IRS. ← Back to the glossary
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