For international homeowners in Washington, D.C.—particularly those affiliated with the World Bank or International Monetary Fund—selling property involves more than just finding the right buyer. If you hold a G4 visa, your residency status for tax purposes can trigger the Foreign Investment in Real Property Tax Act (FIRPTA).
FIRPTA is not a tax itself, but a mandatory withholding used by the IRS to ensure foreign sellers fulfill their U.S. income tax obligations. Understanding how this affects your liquid proceeds at closing is the difference between a smooth transition and a financial headache.
Frequently Asked Questions
What exactly is the withholding amount? Standard FIRPTA withholding is 15% of the gross sales price. Note that this is based on the total sale amount, not your net profit. For a $1,000,000 home, $150,000 is sent directly to the IRS at closing.
Does my G4 visa status exempt me? Not automatically. While G4 visa holders are often “non-resident aliens” for income tax, the IRS “Substantial Presence Test” or your intent to remain in the U.S. can complicate your status. If you are considered a foreign person at the time of sale, FIRPTA applies.
Can I reduce the amount withheld? Yes, by applying for a Withholding Certificate (Form 8288-B). If you can prove your actual tax liability will be less than 15%, the IRS may allow a reduced withholding. However, this must be filed on or before the date of closing.
When do I get my money back? If the withheld amount exceeds your actual tax due, you must file a U.S. tax return the following year to claim a refund. Because of this lag, advanced planning is essential to ensure you have the liquidity needed for your next move.
The Bottom Line: Don’t wait until you have a contract in hand. Consult with a tax professional early to determine your status and avoid surprises at the settlement table.