Brazilian Investor Navigates FIRPTA and Obtains ITIN for U.S. Real Estate

Problem

Carlos purchased a Miami condo as a rental investment. When he decided to sell three years later, his escrow company withheld 15% of the entire sale price under FIRPTA — $22,500 on a $150,000 sale. His actual capital gain was far smaller than the withheld amount, but without an ITIN he could not file a return to reclaim the excess.

Approach

We filed Carlos's W-7 application with the required documentation for a 1040-NR filing. As a Brazilian national with no U.S. SSN, he qualified for an ITIN under the filing-required exception. We certified his Brazilian passport as a CAA and coordinated with his U.S. tax preparer on the 1040-NR.

Outcomes

• ITIN issued in 14 weeks
• 1040-NR filed reporting actual capital gain
• FIRPTA refund processed by the IRS — excess withholding returned
• Annual rental income now properly reported with deductions
• Compliant U.S. tax record established for future investments

What is FIRPTA and Why It Affects Foreign Real Estate Investors

FIRPTA — the Foreign Investment in Real Property Tax Act — requires that when a foreign person sells U.S. real estate, the buyer (or escrow company) must withhold a portion of the sale price and remit it to the IRS. As of 2024, the standard withholding rate is 15% of the gross sale price.

This 15% is not a tax — it's a prepayment. The IRS collects it upfront because foreign sellers might otherwise leave the U.S. without filing a return. The actual tax owed depends on the seller's capital gain, allowable deductions, and applicable tax rates. For many sellers, the real tax liability is far less than the 15% withheld.

Brazil and the United States: No Income Tax Treaty

Unlike many countries, Brazil does not have an income tax treaty with the United States. This means Brazilian real estate investors cannot claim treaty benefits to reduce their tax rate. Their U.S. capital gains are taxed at the standard IRS rates for non-resident aliens — typically 15–20% for long-term gains.

However, "no treaty" doesn't mean "no recourse." The 15% FIRPTA withholding is still just a withholding — not a final tax. By filing a 1040-NR with an ITIN, a Brazilian seller reports their actual gain (after cost basis, depreciation recapture rules, and deductible selling costs) and pays tax only on that amount. The IRS refunds any over-withheld balance.

The ITIN Process for Real Estate Investors

Carlos needed his ITIN quickly — FIRPTA refunds take time, and the clock starts only after the 1040-NR is filed. We expedited the certification process, certifying his Brazilian passport as a CAA and submitting the W-7 and 1040-NR attachment together.

For foreign property owners who have been receiving rental income, an ITIN also enables proper annual reporting of that income — with deductions for mortgage interest, depreciation, property management, insurance, and repairs. Many foreign landlords are unknowingly under-reporting or missing deductions that significantly reduce their actual U.S. tax liability.