$300,000 FIRPTA Exception: Buyer's Personal Residence

Section 01How the buyer-residence exception actually works

FIRPTA is a withholding mechanism, not a tax in itself. When a foreign person disposes of a US real property interest, the buyer (not the seller) is required by federal law to deduct a percentage of the gross sale price and remit it to the IRS within 20 days of closing. The seller files a US tax return after year-end and either receives a refund of any over-withholding or pays the residual liability. The 15% default rate sits at IRC §1445(a) (federal US) and has applied to closings on or after February 17, 2016.

The personal-residence exception is a carve-out from that default. It does not rely on the seller's status, intentions, or tax history. It relies entirely on three facts about the buyer side of the transaction.

First, the buyer must be an individual, not a corporation, partnership, trust, or LLC. Per 26 CFR §1.1445-2(d)(1) (federal US), the regulation is explicit: the exception does not apply where the transferee is anything other than a natural person, even if that entity acquires the property on behalf of an individual who will live there.

Second, the amount realized (the gross sale price plus any liabilities the buyer assumes) must not exceed the relevant threshold. For the 0% tier, that ceiling is $300,000 USD. For the 10% tier, that ceiling is $1,000,000 USD.

Third, the buyer or a member of the buyer's family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person, during each of the first two 12-month periods following the date of transfer. The test is built around days of use, not days of the calendar year. Vacant days are excluded from the count. If a buyer occupies the property for two months and rents it for four months in a 12-month period, the test is satisfied (two of six used months exceeds the 50% floor). If the buyer never sets foot in the property and it is rented out for ten months with two months vacant, the buyer fails the test (zero of ten used months).

The exception applies regardless of how the seller is organized. A Canadian individual, a Canadian corporation, a Quebec SENC, or a non-US trust can all benefit from the exception on the seller side, provided the buyer-side facts line up.

Section 02The three withholding tiers, mapped

Section 03What the buyer's affidavit actually contains

The IRS does not publish a mandatory form for the buyer-residence affidavit. The closing agent (escrow officer, title company, or Florida-licensed attorney) typically drafts it from a standard template. The text covers four items.

First, the buyer's identity, status as an individual, and acknowledgement that the buyer is the transferee.

Second, the amount realized, with the figure stated in USD.

Third, a sworn statement, under penalty of perjury, that the buyer or a member of the buyer's family has definite plans to reside at the property for at least 50% of the days the property is used during each of the first two 12-month periods after closing.

Fourth, the buyer's signature and date.

Two things matter about this document. The affidavit does not bind the buyer to actually live at the property. It binds the buyer to a sworn statement about intent at the moment of signing. If the intent later changes for genuine reasons (job transfer, divorce, illness, market reversal), the buyer is not automatically liable for fraud. Liability for false affidavit arises only when the buyer signed knowing the intent was untrue, or when an agent involved in the transaction had actual knowledge that the statement was false.

The affidavit is also not filed with the IRS at closing. The closing agent retains the original. The IRS sees the document only if a later audit or examination of the seller, the buyer, or the closing agent's file pulls it.

Section 04What this means for a Canadian seller

This is the section that determines whether the article is useful to you. Three concrete consequences flow from the buyer-residence exception.

Consequence 1: your buyer's identity affects your closing wire. If a Canadian sells an Orlando condo to a US individual buyer for $280,000 USD, and the buyer signs the residence affidavit, the seller's wire at closing is the full sale price minus selling costs. Zero FIRPTA withholding. If the same Canadian sells the same condo for $310,000 USD with the same buyer, $31,000 USD (10%) gets withheld and remitted to the IRS. If the buyer is a US LLC instead of an individual, $46,500 USD (15%) gets withheld regardless of price. The seller's final US tax liability does not change between these scenarios. Only the cash flow at closing changes.

Consequence 2: the 0% and 10% tiers do not eliminate the seller's tax obligation. They eliminate or reduce the IRS's collection mechanism at closing. The seller must still file Form 1040-NR (federal US) for the year of sale, report the gain, calculate the actual US federal tax due, and pay any balance owed. A Canadian seller who reads the 0% rate and concludes "no US tax on this sale" is misreading the rule.

Consequence 3: residual risk on a failed affidavit. Per IRC §1445(d) (federal US), the buyer is the withholding agent and is personally liable for the full 15% if the IRS later determines the affidavit was false or that the residence test was not met. In practice, IRS recourse against the individual buyer (whose property is now in Florida) is more reliable than against a Canadian seller already back in Quebec. If the IRS pursues the seller through the tax-return mechanism instead, the seller has no contractual recourse against the buyer unless the FAR/BAR contract or its riders include a specific indemnity provision. The Canadian tax outcome on the T1 (federal CA) and TP-1 (provincial QC) is unaffected by FIRPTA outcome at closing.

Section 05Quebec sale of a Florida property: the comparison

Canadian law does not have a "buyer-residence-changes-seller-withholding" mechanism. The Canadian framework is uniform. When a non-resident sells Canadian real estate, the buyer must withhold under section 116 of the Income Tax Act (federal CA), with a parallel Quebec withholding under article 1102.1 of the Loi sur les impôts (provincial QC). The buyer's plans for the property are not a factor. The system is keyed entirely to the seller's residence status and to a compliance certificate process driven by the CRA and Revenu Québec.

The table below frames the parallel for a Canadian seller selling a Florida property and for a non-resident selling a Quebec property, layer by layer.

Section 06Worked example

A Quebec couple owns a two-bedroom condo in Hollywood, Florida. Purchased in 2019 for $215,000 USD. Listed in 2026 at $295,000 USD. The eventual buyer is a young US-citizen couple from Atlanta planning to retire in Florida. They sign the FAR/BAR Residential Contract for Sale and Purchase at $290,000 USD.

At closing.

Amount realized: $290,000 USD. IRC §1445(b)(5) applies because the amount is at or below $300,000 USD, the buyer is an individual, and the buyer states a residence intent. The buyer signs the residence affidavit at closing. The closing agent retains the original. FIRPTA withholding: $0 USD. The seller wires the full $290,000 USD minus selling costs.

At post-closing on the US side.

The seller files Form 1040-NR for tax year 2026. Capital gain (federal US): $290,000 USD minus $215,000 USD basis minus selling costs of approximately $20,000 USD equals $55,000 USD. US federal long-term capital gains tax on $55,000 USD is approximately $8,250 USD at the 15% bracket applicable to that income range. The seller pays this amount with the 1040-NR filing.

At post-closing on the Canada side.

The seller reports the gain on T1 (federal CA) and TP-1 (provincial QC) for tax year 2026. The Canadian capital gain is calculated in CAD using the actual transaction-date FX rate for both legs (acquisition and sale), not a single year-end rate. The seller claims a foreign tax credit against the $8,250 USD US tax paid, subject to Article XXIV of the Canada-US Tax Convention (federal CA / federal US). The result is no double taxation on the gain, with the higher of the two jurisdictions' tax rates effectively applying.

Comparison: same condo at $310,000 USD.

If the contract price had been $310,000 USD with the same buyer, IRC §1445(c)(4) would apply: amount above $300,000 USD but at or below $1,000,000 USD, with residence affidavit. FIRPTA withholding would be $31,000 USD (10% of $310,000 USD). The seller would have $31,000 USD held by the IRS until the 1040-NR is filed and the refund processed (typically 6 to 12 months post-filing). The final US tax liability remains in the same neighborhood ($55,000 USD x 15% = $8,250 USD if the basis arithmetic is similar). The seller eventually recovers approximately $22,750 USD of the $31,000 USD withheld as a refund.

The lesson is precise: the buyer-residence exception is a cash-flow timing instrument. It does not change the seller's final US tax liability. It changes when the cash is in the seller's hands.

Section 07Common mistakes

1. Assuming the seller can "elect" the exception. The exception is the buyer's. The seller has no unilateral authority to invoke it. If the buyer refuses to sign the affidavit (concerns about future intent, advice from their own counsel, or simple inertia), the closing proceeds at the 15% default rate. Sellers who price below $300,000 USD assuming they will receive the full proceeds at closing can find themselves short by $43,500 USD in unexpected withholding.

2. Misreading the 50% rule as "183 days per year". Multiple secondary sources frame the rule as a 183-day requirement. That framing is incorrect. The regulation requires 50% of the days the property is used by any person, with vacant days excluded. A buyer who uses the property 60 days a year and rents it 0 days satisfies the test. A buyer who uses it 60 days and rents it 100 days fails the test (60 of 160 used days is 37.5%, below the 50% floor).

3. Selling to a buyer who will set up an LLC at closing. The exception requires the transferee to be an individual. If the FAR/BAR contract is assigned to a single-member LLC at closing (common for asset protection on the buyer side), the exception evaporates and full 15% withholding applies, regardless of the buyer's actual living plans. Sellers should require contract language preventing assignment to an entity, or accept the withholding consequence.

4. Trusting an oral assurance from the buyer. Until the affidavit is signed at closing, the seller has no enforceable claim on the exception. Sellers who structure marketing or pricing decisions around the assumption of a residence buyer should require, as an explicit contract contingency, that the buyer execute the affidavit at closing.

5. Confusing the buyer's residence affidavit with the seller's non-foreign affidavit. These are two different documents with two different purposes. The seller's non-foreign affidavit (under IRC §1445(b)(2), federal US) certifies that the seller is not a foreign person, and removes withholding entirely. A Canadian seller cannot sign that document. The buyer's residence affidavit reduces or eliminates withholding by establishing the buyer's intended use. The two are not interchangeable, and a closing agent who confuses them creates tax and liability exposure for both sides.

6. Ignoring the FAR/BAR FIRPTA addendum at the contract stage. The standard FAR/BAR Residential Contract for Sale and Purchase includes a FIRPTA provision and an optional FIRPTA addendum. Sellers who sign without reviewing those provisions can find that indemnification language has been altered or removed, that the affidavit is silent on family-member residence (which the regulation allows), or that the closing agent's identity has been left blank. A Florida-licensed attorney's review at the contract stage costs significantly less than recovering miswithheld funds afterward.

7. Filing for an IRS withholding certificate (Form 8288-B) when the residence exception alone would suffice. Form 8288-B applies when the seller wants to reduce withholding based on actual maximum tax liability, which the IRS adjudicates over approximately 90 days. A residence-exception transaction does not require Form 8288-B and should not pursue it: the affidavit at closing is the operative document and produces the same outcome with less administrative drag.

Section 08Actionable checklist for a Canadian seller

1. Confirm whether the contract price is at or below $300,000 USD, between $300,001 USD and $1,000,000 USD, or above $1,000,000 USD. The threshold determines which rule applies.
2. Verify the buyer is an individual, not a corporation, LLC, partnership, or trust. If the buyer is taking title in any non-individual form, the exception does not apply.
3. Have the listing agent and the buyer's agent surface, in writing, the buyer's intended use of the property before contract signature. "Personal residence", "vacation home", and "second home with family use" can all qualify when the 50% used-days test is met.
4. Add a contract contingency requiring the buyer to execute, at closing, the buyer-residence affidavit conforming to IRC §1445(b)(5) or IRC §1445(c)(4) as applicable, and prohibiting assignment to a non-individual entity.
5. Confirm with the closing agent (title company or Florida-licensed attorney) that they will draft and retain the affidavit, and that they will keep the original in their file for the IRS-mandated retention period.
6. Confirm in writing with the closing agent the wire amount the seller will receive at closing, net of any withholding. Do not rely on verbal estimates.
7. If the sale price is between $300,001 USD and $1,000,000 USD, plan cash flow assuming a 10% withholding (potentially $30,000 USD to $100,000 USD held by the IRS for 6 to 12 months post-closing).
8. Engage a cross-border tax professional licensed for Canada-US matters to file Form 1040-NR (federal US) for the year of sale, claim any FIRPTA refund, and coordinate the foreign tax credit on the Canadian return.

Section 09FAQ

Does the exception apply if the buyer is a US citizen? Yes. The exception applies based on the buyer's status (individual + residence intent), not the buyer's nationality. The seller's non-resident status is what triggers FIRPTA in the first place; the buyer's profile is what triggers the exception.

Does the exception apply if the buyer is also a non-US person? Yes. The 26 CFR §1.1445-2(d)(1) regulation does not require the buyer to be a US person. A French citizen buying a Florida home for personal use, from a Canadian seller, can sign the affidavit and trigger the exception. The legal requirements are that the buyer is an individual (not an entity) and has definite plans to reside there for at least 50% of used days during each of the first two 12-month periods after closing.

Can the buyer sign the affidavit and then change their mind two years later? The affidavit certifies intent at the time of signing. A genuine change of circumstances after closing (job, family, market) does not retroactively invalidate the affidavit. What invalidates it is signing knowing the intent was false. Liability for a false affidavit shifts to the buyer (the withholding agent under IRC §1445(d)) and can extend to the buyer's agent if the agent had actual knowledge that the statement was untrue.

What if the property will be rented part-time? The 50% rule allows part-time rental. If the buyer occupies the property 60 days a year and rents it out 30 days, the buyer satisfies the test (60 of 90 used days, which is 67%). If the buyer occupies 30 days and rents 90 days, the buyer fails (30 of 120, which is 25%). Document expected use carefully at the contract stage.

Does the exception apply to commercial property the buyer plans to convert to residential? The regulation requires the property to be acquired for use as a residence. Acquisition of a commercial property with conversion plans is a gray area, and the IRS has not issued definitive guidance for it. A Florida-licensed attorney with FIRPTA experience should be consulted for any non-standard property type before contract signature.

What if the property is a duplex or has a rental unit? The exception applies to the property as a whole, not to a specific unit. If the buyer occupies the owner's unit and rents the other, the test applies to total used days across the property. The contract or FAR/BAR addendum should specify which days count as "buyer use" versus "tenant use" to avoid ambiguity at audit.

Does the exception apply if the buyer's adult child will live there full-time? Yes. The regulation allows family-member residence to count toward the 50% test. "Family" is interpreted broadly under federal tax law and includes spouse, parents, children, and siblings. A Canadian buyer's adult child living year-round in the Florida property can satisfy the residence test for the Canadian buyer.

Does the seller have any way to reduce withholding if the buyer refuses to sign the affidavit? Yes, via Form 8288-B (federal US). The seller (or buyer, or either party's authorized representative) can apply for an IRS withholding certificate based on actual maximum tax liability before closing. Processing typically takes approximately 90 days. A separate guide on Form 8288-B covers that path.

Is the FAR/BAR contract the only contract template that handles this? No. FAR/BAR is the dominant residential template in Florida, but other templates exist (commercial, AS/IS variants, custom contracts drafted by attorneys). Whichever template is used, the FIRPTA provisions and the buyer-residence affidavit need to be addressed explicitly, not assumed.