The Brokery480.999.9945
Canadian And Foreign Sellers Firpta Arizona

Foreign & Canadian Sellers
By Anne Sostman | The Brokery | License SA718853000

Selling as a Canadian
or Foreign Owner.

FIRPTA, Arizona

If you are not a United States person for tax purposes, the buyer of your Arizona home is required by law to withhold a share of the sale and send it to the IRS. It is calculated on the gross sale price rather than your profit, which is why the number surprises almost everyone. It is reducible, it is often refundable, and both of those depend entirely on starting early.

Start the Conversation
“Nobody has ever been happy to learn about FIRPTA during escrow. Handled before listing it is a line item. Discovered a week before closing it is six figures you did not plan for.”
Anne Sostman
15%
Standard withholding on the amount realized
Gross
Calculated on sale price, not on gain
Refundable
Withholding is a deposit, not the final tax
Before listing
When the conversation should happen
Foreign & Canadian Sellers
Cross Border CPA Introductions
Scottsdale, Paradise Valley, Arcadia
Timeline Built Around the Filing
Published by Anne Sostman

The Rule

Withheld on the price, not on the profit.

FIRPTA requires the buyer of United States real property to withhold a percentage of the purchase when the seller is a foreign person, and to remit it to the IRS. The standard figure is 15 percent of the amount realized, which for most sales means the gross contract price.

That is the sentence worth reading twice. It is not 15 percent of your gain. An owner who bought in 2015, watched the market rise, and is selling at $900,000 is not looking at 15 percent of the increase. They are looking at roughly $135,000 held back from the total, regardless of what they originally paid.

Reduced rates and outright exemptions exist. They depend on the sale price and on whether the buyer intends to occupy the home as a residence. None of them apply automatically, and none of them can be claimed after the fact at the closing table.

General information, not tax or legal advice. FIRPTA outcomes turn on individual facts. Work with a cross border accountant before making decisions about your sale.

15 percent
The standard rate, applied to the amount realized on the sale.
Buyer's duty
The obligation sits with the buyer, so it is enforced at closing whether or not it was discussed.
Not the tax
It is a deposit against what you owe. The real number is settled on a United States return.

The Sequence

What order to do this in.

Almost every bad FIRPTA outcome is a timing failure rather than a rules failure.

First

Talk to a Cross Border CPA

Before listing, not during escrow. They establish whether a reduced withholding certificate is worth pursuing for your numbers, and what it will require.

Second

Sort the Identification Number

A United States taxpayer identification number is required to file. Obtaining one takes time, and it is a common reason sellers run out of runway.

Third

Apply for the Certificate

The IRS process for approving a reduced amount based on expected actual tax rather than the gross price. It has to be filed and processed, which is why it cannot start at contract.

Fourth

Set the Listing Timeline

Only now does the calendar make sense. The sale can be paced so the paperwork and the closing are not racing each other.

Fifth

Close With It Handled

The withholding is a known, planned line item rather than a surprise deduction discovered in the final settlement statement.

Then

File and Recover

You file a United States return for the year of sale. Where too much was withheld, the difference comes back. Many sellers recover a substantial share.

Why It Goes Wrong

The problem is almost never the rule.

Foreign ownership is not unusual in this market. Canadian owners in particular have been buying Scottsdale and Paradise Valley second homes for decades. What is unusual is anyone raising FIRPTA early.

The sale is typically listed, marketed and put under contract by people focused on the transaction, and the withholding surfaces when the title company builds the settlement statement. By then the useful options have expired. The certificate cannot be obtained retroactively. The identification number cannot be issued overnight. The seller accepts the full amount because there is no alternative left.

The fix costs nothing and is entirely a matter of sequence. Ask the question before the sign goes up.

Raised early
It is a planned line item and often a materially smaller one.
Raised late
The full standard rate applies because the alternatives need lead time nobody has left.
Either way
The tax owed is the same. Only the timing of your money changes, and by a lot.

Common Questions

Foreign Seller Questions, Answered.

What is FIRPTA and does it apply to me?
FIRPTA is the Foreign Investment in Real Property Tax Act. It applies when the seller of United States real property is a foreign person for tax purposes, which includes most Canadian snowbirds who own an Arizona home but are not United States citizens or green card holders. When it applies, the buyer is legally required to withhold a percentage of the sale and remit it to the IRS. It is the buyer's obligation, not a courtesy, which is why it gets enforced at closing whether or not anyone raised it earlier.
How much is withheld when a foreign person sells a home in Arizona?
The standard withholding is 15 percent of the amount realized, which generally means the gross sale price, not your profit. That distinction is the part that shocks people. On a $900,000 sale, roughly $135,000 can be held back at closing even if your actual gain was a fraction of that. Reduced rates and exemptions exist and are tied to the sale price and to whether the buyer intends to use the property as a residence. Confirm your specific rate with a cross border accountant before you list, not after you are under contract.
Is the withholding the same thing as the tax I owe?
No, and this is the most important thing to understand. Withholding is a deposit against the tax, not the tax itself. You file a United States tax return for the year of the sale, the actual tax on the actual gain is calculated, and if too much was withheld the difference is refunded. Many sellers get a substantial amount back. The problem is timing: the money is gone at closing and the refund arrives after the return is processed, which can be many months later.
Can I reduce the withholding before closing?
Often yes. The IRS provides a withholding certificate process, which asks them to approve a reduced amount based on the expected actual tax rather than the gross price. It has to be applied for and it takes time, which is the reason this belongs in the conversation before the home is listed rather than during escrow. You will also need a United States taxpayer identification number, and obtaining one is itself not instant. A cross border CPA handles the filing; my job is making sure the timeline accounts for it.
Does Arizona withhold anything on top of the federal amount?
State treatment is separate from the federal rule and should be confirmed for your situation with your accountant. Some states operate their own nonresident withholding regime in addition to FIRPTA and some do not. Do not assume the federal number is the whole picture, and do not assume it is not.
When should a Canadian owner start this conversation?
Before listing. The sequence that works is: talk to a cross border accountant, establish whether a reduced withholding certificate is worth pursuing, confirm the identification number situation, and only then decide on timing and price. Sellers who discover FIRPTA a week before closing usually accept the full 15 percent because there is no longer time to do anything else. That is an avoidable and expensive way to learn about it.
Who handles Canadian and foreign sellers in Scottsdale and Paradise Valley?
Anne Sostman of The Brokery represents foreign and Canadian owners selling in Scottsdale, Paradise Valley and Arcadia, and coordinates the sale timeline around the cross border tax work rather than treating it as someone else's problem discovered at closing. She works with cross border accountants who handle the withholding certificate filings and can make the introduction before the property is listed.