FIRPTA in Los Angeles: What Foreign Sellers Pay at Closing

How much is withheld when a foreign owner sells a home in Los Angeles?

A non-US owner selling a Los Angeles home priced over $1 million usually sees about 18% of the gross sale price held back at closing. That breaks down to 15% for federal FIRPTA withholding and 3.33% for California's state withholding. The amount comes off the full price, not your profit, and it is a prepayment against your tax rather than the tax itself. You reclaim the excess later by filing US and California returns, and you can often reduce the federal portion ahead of closing with IRS Form 8288-B.

By Paul Blair | June 8, 2026

If you are a foreign national selling a home in the Hollywood Hills, Beverly Hills, Bel Air, or anywhere across the Westside, FIRPTA is the line item that surprises sellers the most. Buyers from Canada, the UK, China, the Gulf, and Mexico have been a large part of LA's high-end market for years. When those same owners sell, a federal law most domestic sellers never think about changes the math at the closing table.

Here is what FIRPTA is, what it costs, and how to keep it from tying up more of your money than it should.

What FIRPTA actually is

FIRPTA stands for the Foreign Investment in Real Property Tax Act. It exists so the IRS can collect tax from sellers who live outside the United States and might be hard to reach after a sale closes.

The mechanism is unusual. The law puts the legal duty to withhold on the buyer, not the seller. In practice your escrow company handles the paperwork, but the buyer is the responsible party, which is why buyers and their agents pay close attention any time the seller is a foreign person. The money still comes out of your proceeds.

The withholding math

Federal FIRPTA withholding is tiered, and it is calculated on the gross sales price:

• Under $300,000: nothing withheld, if the buyer signs a declaration that they will use the home as a residence.
• $300,001 to $1,000,000: 10% of the sales price.
• $1,000,001 and above: 15% of the sales price.

Almost every LA luxury sale lands in that top tier, so plan on 15% federal.

Then California adds its own withholding on top, reported on Franchise Tax Board Form 593. The state rate is 3.33% of the gross sales price on most sales.

Put together, a foreign seller above $1 million is looking at roughly 18.33% of the full price withheld at closing. On a $7 million Bel Air sale, that is about $1.28 million held back. On a $15 million estate, it is more than $2.7 million.

The part that catches people off guard

The withholding is on the price, not your gain.

A domestic seller thinks about tax on profit. They bought at $4 million, sold at $7 million, and expect to owe on the $3 million difference after the capital gains rules. FIRPTA does not work that way. The 15% comes off the entire $7 million, whether your gain was large, small, or nonexistent.

That matters most for owners who paid cash years ago, refinanced along the way, or have a high cost basis. You can owe very little actual tax and still watch a seven-figure sum leave the closing wire. It is refundable, but it is gone until you file.

This is the single most important thing to understand before you list. FIRPTA withholding is a prepayment, not your final bill. You get the excess back. The real questions are how much gets held and how long your money sits with the government.

How to reduce the federal withholding

You do not have to accept the full 15% if your real tax will be lower. The tool is IRS Form 8288-B, the application for a withholding certificate.

Here is how it works:

1. You or your CPA file Form 8288-B with the IRS, showing your expected actual gain and the tax that goes with it.
2. The application has to be submitted on or before the closing date.
3. The IRS reviews it and, in most cases, responds within about 90 days. Delays past that are common, so file early.
4. Until the IRS decides, the buyer holds the 15% in escrow rather than sending it to the IRS. Once the certificate is approved, only the reduced amount goes to the IRS and the rest is released to you.

For a seller with a modest gain, an 8288-B can be the difference between getting your money back in a few weeks versus waiting until you file a return the following year. It takes planning, which is why this is a conversation to have before you list, not after you are in escrow.

California's 3.33% and Form 593

California's withholding is separate from the federal rule, and an 8288-B does not reduce it. The settlement agent withholds 3.33% of the gross price and sends it to the Franchise Tax Board, and you reclaim any excess when you file your California return.

There are exemptions and, in some cases, an alternative calculation based on the actual gain, so raise this with your escrow officer and tax advisor early.

You will need an ITIN

To handle the withholding and to claim your refund, you need a US taxpayer identification number. If you do not already have one, an Individual Taxpayer Identification Number (ITIN) can take six to eight weeks to process.

If you wait until you are in escrow to start, you can create delays at the worst possible time. Begin the ITIN process as soon as you decide to sell.

What this means for your timeline and your net

A foreign-seller transaction in Los Angeles has a few extra moving parts that a domestic sale does not:

• Escrow, not a title company, coordinates the withholding and the Form 593 filing in California.
• The buyer watches FIRPTA compliance closely, because the liability is theirs if it is handled wrong.
• An 8288-B application, an ITIN, and the 593 paperwork all take lead time.

None of this should stop you from selling. It just means the difference between a smooth close and a frustrating one usually comes down to setting these pieces up before the listing goes live. Your net proceeds at closing, and how quickly you see the withheld money again, both depend on getting ahead of it.

This is the kind of planning I walk foreign sellers through before we list, alongside the rest of the seller closing costs and net proceeds picture, the capital gains side of the sale, and, where it applies, the Measure ULA transfer tax on high-value LA sales.

Frequently Asked Questions

Is FIRPTA withholding based on my profit or the full sale price?

The full gross sales price. Federal FIRPTA withholds 15% of the entire price on sales over $1 million, regardless of how much you actually gained. That is why owners with a small gain can still see a large amount held back, refundable after they file.

Can I lower the 15% FIRPTA withholding?

You cannot avoid it if you are a foreign person, but you can apply to reduce it. Filing IRS Form 8288-B before closing asks the IRS to set the withholding closer to your real expected tax. Until the IRS rules, the funds sit in escrow rather than going to the IRS.

Does California take a cut too?

Yes. California withholds 3.33% of the gross sales price through Franchise Tax Board Form 593, separate from federal FIRPTA. Combined, a foreign seller above $1 million usually sees around 18% withheld at closing.

How long does it take to get the withheld money back?

If you file Form 8288-B, the IRS generally responds in about 90 days and the reduced balance is released around then. Without it, you reclaim the excess when you file your US and California tax returns for the year, which can mean waiting until the following filing season.

Do I need a US tax ID number to sell?

Yes. You need an ITIN to process the withholding and claim your refund. It can take six to eight weeks to obtain, so start the application as soon as you decide to sell.

Before you list

If you are a non-US owner, FIRPTA and California's withholding can hold back close to a fifth of your sale price at closing, even when your actual tax is far less. The money is refundable, but the amount held and the time it sits both come down to planning you do before the home reaches the market.

If you are thinking through a sale, I can help you map out your real net, coordinate with your tax advisor on an 8288-B, and get the timeline right. Start with a home value estimate or reach out directly, and we will walk through your numbers.

About Paul Blair

Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas and Los Angeles. With 22 years in the business and more than $200 million in closed transactions, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.