Selling in Menlo Park? FIRPTA Basics for Foreign Sellers

Are you selling a Menlo Park home or investment property as a non-U.S. owner? The biggest surprise at closing is often FIRPTA withholding and how it stacks with California’s own rules. You want a smooth sale and clarity on how much cash you will actually receive. This guide explains the key rates, forms, timelines, and steps so you can plan with confidence. Let’s dive in.

FIRPTA essentials

FIRPTA is a federal rule that requires the buyer to withhold tax when a U.S. real property interest is sold by a foreign person. The buyer is the withholding agent and is responsible for collecting and sending the funds to the IRS. FIRPTA applies to most sales of real property and certain interests tied to real property.

A foreign person can be a nonresident alien, foreign corporation, partnership, trust, or estate. If the seller is foreign and no exception applies, the buyer must withhold and remit funds using the IRS forms listed below.

Withholding rates and exceptions

The standard FIRPTA rate is 15% of the amount realized. Amount realized includes cash paid, other property given, and any liabilities the buyer assumes.

If the buyer will use the home as a residence, these residential thresholds may apply:

• Sale price at or below $300,000 with buyer occupancy as a residence: generally no FIRPTA withholding when proper buyer affidavit is provided.
• Sale price over $300,000 up to $1,000,000 with buyer occupancy as a residence: 10% withholding.
• Sale price over $1,000,000: 15% withholding.

Buyer and escrow paperwork

The buyer files Form 8288 and Form 8288-A with the IRS and remits the withheld funds. The seller receives a copy of Form 8288-A to claim the credit on their U.S. tax return. If the buyer fails to withhold when required, the buyer can be liable for tax and penalties.

Escrow and title in the Bay Area typically coordinate the mechanics. They collect the FIRPTA funds at closing and prepare the state form listed below. Sellers claiming non-foreign status are often asked for a nonforeign affidavit and a W-9.

California withholding in Menlo Park

California requires real estate withholding on most sales unless an exemption applies. The default method is 3.33% of the total sales price. As an alternative, a seller can elect a gain-based method and report the calculation on Form 593.

Escrow or the remitter files Form 593 and sends payment to the Franchise Tax Board by the 20th day of the month after closing. California withholding is separate from FIRPTA. On many foreign-seller deals, both withholdings apply.

Reduced withholding and timing

A seller or buyer can request a reduced or zero withholding withholding certificate using Form 8288-B when the actual tax is lower than the statutory amount. The IRS generally acts on a complete application in about 90 days after receiving all required information.

If you need an ITIN, you can apply with Form W-7. You can submit a W-7 with the 8288-B package, though it may add time. Start early to keep the closing on schedule.

Menlo Park transfer tax snapshot

Menlo Park sales typically include documentary transfer tax of about $1.10 per $1,000 of price. This is often shown as $0.55 city plus $0.55 county. Always confirm the exact amount with your escrow officer, since local practices and assessments can vary.

Practical checklist and timeline

Use this step-by-step list to stay ahead of deadlines:

1. Confirm seller status early

• Decide if the seller is a foreign person for FIRPTA. If yes, notify the buyer’s side and escrow so everyone can plan the withholding.

2. Get a U.S. TIN or ITIN

• If you do not have an SSN or ITIN, begin the ITIN process right away so you can file forms and apply for a withholding certificate if needed.

3. Consider a withholding certificate

• If expected U.S. tax is lower than the standard withholding, file Form 8288-B as soon as you have a binding contract. Plan for about 90 days from a complete submission to IRS action.

4. Coordinate California Form 593

• Expect the 3.33% default unless an exemption or gain-based method applies. Provide certifications to escrow in time to avoid unnecessary withholding.

5. Closing day readiness

• If no IRS certificate is issued by closing, escrow will collect 15% FIRPTA withholding (or 10% when the buyer-occupant rule applies between $300,000 and $1,000,000), plus California withholding unless exempt.

6. After closing filings

• File a U.S. return (for individuals, typically Form 1040-NR) and use stamped Form 8288-A to claim the federal withholding credit. File California returns to claim state credits. Refunds may be available if withholding exceeded tax due.

7. Bring in experienced advisors

• FIRPTA planning can involve basis, depreciation, 1031 exchanges, and treaty considerations. Engage a U.S. tax advisor early. Escrow handles withholding logistics but not tax planning.

How TN Realty supports your sale

You deserve a smooth, well-managed closing. TN Realty is a boutique, owner-led brokerage that brings a process-driven approach to complex sales involving FIRPTA and California withholding. We coordinate closely with escrow and keep your timeline, paperwork, and deliverables on track from listing to recording.

If you prefer Cantonese or Mandarin, we provide bilingual service to make each step clear. Whether you are selling a primary home or an investment property in Menlo Park, you will get responsive guidance, transparent communication, and neighborhood-level insight.

Ready to plan your sale with clarity and confidence? Connect with Tony Ngai for a tailored strategy.

FAQs

Who is responsible for FIRPTA withholding in a Menlo Park sale?

• The buyer is the statutory withholding agent and must withhold and file IRS Forms 8288 and 8288-A unless a valid IRS withholding certificate changes the amount.

How fast can a foreign seller recover withheld funds after closing?

• If no IRS withholding certificate was issued before closing, you claim the credit on your U.S. tax return; the IRS generally processes withholding-certificate requests in about 90 days when complete, but tax return refunds come after filing and processing.

Does California’s 3.33% withholding replace FIRPTA for foreign sellers?

• No. FIRPTA is federal and California withholding is state; both can apply to the same sale and are handled separately, often by escrow at closing.

What if the buyer will live in the Menlo Park home?

• If the buyer uses the property as a residence, FIRPTA withholding is generally 0% at or below $300,000, 10% between $300,000 and $1,000,000, and 15% above $1,000,000, subject to proper buyer affidavit and rules.

What transfer taxes should I expect in Menlo Park?

• Menlo Park sales commonly include documentary transfer taxes of about $1.10 per $1,000 of price, but you should confirm the exact charge with your escrow officer.