Is FIRPTA withheld on my profit or the total sale price?

The total sale price — this is the part that surprises most Canadians. FIRPTA withholding is calculated on your gross proceeds, not your gain. If you sell a $400,000 Florida condo for exactly what you paid for it — no profit at all — the buyer's agent still withholds $60,000 (15% of $400,000) and remits it to the IRS at closing. That $60,000 is your advance deposit against whatever US tax you actually owe. When you file Form 1040NR and your actual capital gains tax is calculated (say, $20,000 on your net gain), the IRS refunds the excess $40,000. The problem is that refund takes 6–12 months to arrive — you leave the closing table with $340,000 instead of $400,000, and you wait.

How long does it take to get my FIRPTA refund?

Realistically, 6–12 months from filing your Form 1040NR. The timeline breaks down roughly as follows: your US closing happens (say, in April), you file your 1040NR after year-end once all tax documents are available (typically January–March of the following year), the IRS processes the return (4–6 months for non-resident returns), and the refund is issued by cheque or wire. If you need the excess refunded faster — for example, to fund a purchase in Mexico or Portugal — you can file Form 8288-A within 20 days of closing to request a reduced withholding based on your estimated actual tax liability. This is called a withholding certificate and, if approved, can significantly reduce how much is held back at the source. However, the IRS must approve the certificate before closing for it to apply — it cannot be filed retroactively after the full 15% has already been remitted.

Do I need an ITIN before selling?

You need an ITIN to file Form 1040NR and claim your FIRPTA refund — but technically you do not need one before the sale closes. The buyer's agent will withhold and remit 15% regardless of whether you have an ITIN or not. However, you should apply for an ITIN as early as possible because IRS Form W-7 (the ITIN application) takes 7–11 weeks to process, and you cannot file Form 1040NR without one. If you wait until after closing to apply, you could easily add 3–4 months to your overall refund timeline. If you are a Canadian who has owned US real estate for years and has been receiving rental income, you likely already have an ITIN from prior US tax filings — check your previous US returns or contact a cross-border CPA to confirm.

Can my US real estate agent handle FIRPTA for me?

Partly. Your US real estate agent or closing agent (title company or attorney) handles the mechanical withholding — they calculate 15% of the gross proceeds, hold that amount in escrow, and remit it to the IRS via Form 8288 within 20 days of closing. They will also file Form 8288-A on your behalf, which creates the record the IRS uses to match your eventual refund claim. What your agent cannot do is file your US non-resident income tax return (Form 1040NR) or your Canadian return (T1 with Schedule 3 and T2209). For those filings, you need a cross-border CPA — an accountant licensed in both Canada and the US who understands both the IRS and CRA requirements. The cost is typically $1,500–$3,000 CAD for a dual-jurisdiction filing on a property sale, which is negligible relative to the refund at stake.

What if I sell at a loss — do I still face FIRPTA withholding?

Yes — FIRPTA withholding is based on gross sale price, not your gain or loss. If you bought a Florida condo for $420,000 and sell it for $400,000 (a $20,000 loss), the buyer's agent still withholds $60,000 (15% of $400,000) at closing. You would then file Form 1040NR showing a net capital loss — meaning your actual US tax liability is $0 or potentially a carryforward loss — and you would receive the entire $60,000 back as a refund. This is one of the cruelest aspects of FIRPTA: it is a cash flow mechanism that operates completely independently of economic reality. Filing a withholding certificate (Form 8288-B) before closing, documenting the expected loss, is the right move in this situation — it allows the IRS to reduce or eliminate the withholding before any money changes hands.

Does Florida's 0% state income tax help with FIRPTA?

Yes, significantly. Florida has no state income tax, which means your total tax burden on a US property sale is limited to federal US tax only — no state capital gains tax on top of the federal rate. Compare this to California (state CGT rate up to 13.3%, applied on the same gain) or New York (state CGT up to 10.9%). For a Canadian selling a $400,000 property with a $100,000 net gain, the Florida advantage over California could be $13,000+ in avoided state tax. This is one of the structural tax advantages of owning property in Florida rather than in high-income-tax states — and it partially offsets Florida's notoriously expensive insurance market. Note: FIRPTA itself is a federal mechanism and applies equally in all 50 states — it is only the state-level capital gains layer that Florida eliminates.

How do I report the US property sale to CRA?

You report the disposition on your Canadian T1 return for the year of sale, on Schedule 3 (Capital Gains and Losses). The gain is calculated in Canadian dollars: your proceeds (USD converted to CAD at the Bank of Canada rate on the date of sale) minus your adjusted cost base (original purchase price, closing costs, and capital improvements, all converted to CAD at the historical rates when those costs were incurred). Currency movements since purchase will affect your Canadian capital gain independently of the USD price movement — many Canadians are surprised to find they have a large CAD gain even when the USD price was flat, due to CAD depreciation since purchase. The foreign tax credit (Form T2209) then allows you to offset the US federal tax you actually paid against your Canadian capital gains tax on the same property. The T2209 credit is limited to the lesser of the foreign tax paid and the Canadian tax on the foreign income — you cannot claim more credit than your Canadian tax on the same gain.

Can I use the FIRPTA withholding as a credit on my Canadian return?

Not directly and not the full amount. FIRPTA withholding is an advance remittance — it is not the tax you paid, it is the amount deposited against what you might owe. What you claim on your Canadian return (Form T2209) is the actual US federal income tax that you are liable for on the property sale — the amount shown on your Form 1040NR as your tax due (net of any FIRPTA recovery). For example, if $60,000 was withheld, your 1040NR shows $18,000 of actual US tax, and the IRS refunds you $42,000 — then $18,000 is the figure you claim as a foreign tax credit on your Canadian return, not $60,000. The CRA credits only tax actually owed and paid to a foreign government, not provisional withholding deposits.

Is FIRPTA withheld on my profit or the total sale price?

The total sale price — this is the part that surprises most Canadians. FIRPTA withholding is calculated on your gross proceeds, not your gain. If you sell a $400,000 Florida condo for exactly what you paid for it — no profit at all — the buyer's agent still withholds $60,000 (15% of $400,000) and remits it to the IRS at closing. That $60,000 is your advance deposit against whatever US tax you actually owe. When you file Form 1040NR and your actual capital gains tax is calculated (say, $20,000 on your net gain), the IRS refunds the excess $40,000. The problem is that refund takes 6–12 months to arrive — you leave the closing table with $340,000 instead of $400,000, and you wait.

How long does it take to get my FIRPTA refund?

Realistically, 6–12 months from filing your Form 1040NR. The timeline breaks down roughly as follows: your US closing happens (say, in April), you file your 1040NR after year-end once all tax documents are available (typically January–March of the following year), the IRS processes the return (4–6 months for non-resident returns), and the refund is issued by cheque or wire. If you need the excess refunded faster — for example, to fund a purchase in Mexico or Portugal — you can file Form 8288-A within 20 days of closing to request a reduced withholding based on your estimated actual tax liability. This is called a withholding certificate and, if approved, can significantly reduce how much is held back at the source. However, the IRS must approve the certificate before closing for it to apply — it cannot be filed retroactively after the full 15% has already been remitted.

Do I need an ITIN before selling?

You need an ITIN to file Form 1040NR and claim your FIRPTA refund — but technically you do not need one before the sale closes. The buyer's agent will withhold and remit 15% regardless of whether you have an ITIN or not. However, you should apply for an ITIN as early as possible because IRS Form W-7 (the ITIN application) takes 7–11 weeks to process, and you cannot file Form 1040NR without one. If you wait until after closing to apply, you could easily add 3–4 months to your overall refund timeline. If you are a Canadian who has owned US real estate for years and has been receiving rental income, you likely already have an ITIN from prior US tax filings — check your previous US returns or contact a cross-border CPA to confirm.

Can my US real estate agent handle FIRPTA for me?

Partly. Your US real estate agent or closing agent (title company or attorney) handles the mechanical withholding — they calculate 15% of the gross proceeds, hold that amount in escrow, and remit it to the IRS via Form 8288 within 20 days of closing. They will also file Form 8288-A on your behalf, which creates the record the IRS uses to match your eventual refund claim. What your agent cannot do is file your US non-resident income tax return (Form 1040NR) or your Canadian return (T1 with Schedule 3 and T2209). For those filings, you need a cross-border CPA — an accountant licensed in both Canada and the US who understands both the IRS and CRA requirements. The cost is typically $1,500–$3,000 CAD for a dual-jurisdiction filing on a property sale, which is negligible relative to the refund at stake.

What if I sell at a loss — do I still face FIRPTA withholding?

Yes — FIRPTA withholding is based on gross sale price, not your gain or loss. If you bought a Florida condo for $420,000 and sell it for $400,000 (a $20,000 loss), the buyer's agent still withholds $60,000 (15% of $400,000) at closing. You would then file Form 1040NR showing a net capital loss — meaning your actual US tax liability is $0 or potentially a carryforward loss — and you would receive the entire $60,000 back as a refund. This is one of the cruelest aspects of FIRPTA: it is a cash flow mechanism that operates completely independently of economic reality. Filing a withholding certificate (Form 8288-B) before closing, documenting the expected loss, is the right move in this situation — it allows the IRS to reduce or eliminate the withholding before any money changes hands.

Does Florida's 0% state income tax help with FIRPTA?

Yes, significantly. Florida has no state income tax, which means your total tax burden on a US property sale is limited to federal US tax only — no state capital gains tax on top of the federal rate. Compare this to California (state CGT rate up to 13.3%, applied on the same gain) or New York (state CGT up to 10.9%). For a Canadian selling a $400,000 property with a $100,000 net gain, the Florida advantage over California could be $13,000+ in avoided state tax. This is one of the structural tax advantages of owning property in Florida rather than in high-income-tax states — and it partially offsets Florida's notoriously expensive insurance market. Note: FIRPTA itself is a federal mechanism and applies equally in all 50 states — it is only the state-level capital gains layer that Florida eliminates.

How do I report the US property sale to CRA?

You report the disposition on your Canadian T1 return for the year of sale, on Schedule 3 (Capital Gains and Losses). The gain is calculated in Canadian dollars: your proceeds (USD converted to CAD at the Bank of Canada rate on the date of sale) minus your adjusted cost base (original purchase price, closing costs, and capital improvements, all converted to CAD at the historical rates when those costs were incurred). Currency movements since purchase will affect your Canadian capital gain independently of the USD price movement — many Canadians are surprised to find they have a large CAD gain even when the USD price was flat, due to CAD depreciation since purchase. The foreign tax credit (Form T2209) then allows you to offset the US federal tax you actually paid against your Canadian capital gains tax on the same property. The T2209 credit is limited to the lesser of the foreign tax paid and the Canadian tax on the foreign income — you cannot claim more credit than your Canadian tax on the same gain.

Can I use the FIRPTA withholding as a credit on my Canadian return?

Not directly and not the full amount. FIRPTA withholding is an advance remittance — it is not the tax you paid, it is the amount deposited against what you might owe. What you claim on your Canadian return (Form T2209) is the actual US federal income tax that you are liable for on the property sale — the amount shown on your Form 1040NR as your tax due (net of any FIRPTA recovery). For example, if $60,000 was withheld, your 1040NR shows $18,000 of actual US tax, and the IRS refunds you $42,000 — then $18,000 is the figure you claim as a foreign tax credit on your Canadian return, not $60,000. The CRA credits only tax actually owed and paid to a foreign government, not provisional withholding deposits.

Reviewed on March 2026 by the Compass Abroad editorial team

FIRPTA for Canadians Selling US Property: The 15% Withholding Explained

When a Canadian sells US property, FIRPTA requires the buyer's agent to withhold 15% of the gross sale price and remit it to the IRS — not 15% of your profit, 15% of the entire sale price. On a $400,000 Florida condo, that's $60,000 withheld at closing regardless of whether you made a profit.

You can recover the excess by filing IRS Form 8288-A within 20 days of closing (to reduce withholding) or Form 1040NR after year-end. Recovery takes 6–12 months. The Canada-US tax treaty prevents double taxation, but you must actively claim it — it is not automatic.

Key Takeaways

FIRPTA withholds 15% of your gross sale price — not 15% of your profit. On a $400,000 Florida condo, $60,000 is held back at closing and remitted to the IRS regardless of whether you made a gain.
The withholding is not your final tax bill — it is a deposit. Your actual US tax liability is calculated when you file Form 1040NR, and the IRS refunds any excess. Recovery takes 6–12 months.
If the sale price is $300,000 or less AND the buyer will use the property as a principal residence for at least two years, the withholding drops to 10% — or 0% if both conditions are met and the price is $300K or below.
You need a US Individual Taxpayer Identification Number (ITIN) to file Form 1040NR and receive your FIRPTA refund. Apply via Form W-7 — processing takes 7–11 weeks.
The Canada-US Tax Treaty (Article XIII) coordinates capital gains taxation to prevent double taxation. But you must actively claim the treaty credit — it is not applied automatically.
You must also report the US property sale to CRA on your Canadian T1 return (Schedule 3). The foreign tax credit (Form T2209) offsets the US tax paid against your Canadian capital gains liability.
Florida has 0% state income tax, which meaningfully reduces your total tax burden compared to states like California (13.3% state CGT) or New York (10.9%).

15%

FIRPTA withholding rate on gross sale price

$60K

Withheld on $400,000 Florida condo sale

6–12 mo

Typical FIRPTA refund recovery timeline

54%

Canadian snowbirds considering selling US property (Royal LePage, Aug 2025)

FIRPTA Key Facts for Canadian Sellers

FIRPTA Withholding Rate: 15% of gross sale price(IRC §1445)
Withholding on $400K Sale: $60,000 held at closing(IRS)
Reduced Rate Condition: 10% if price ≤ $300K AND buyer uses as residence(IRC §1445(b)(5))
Full Exemption Condition: 0% if price ≤ $300K AND buyer certifies primary residence use(IRC §1445(b)(5))
Recovery Form: Form 8288-A (within 20 days) or Form 1040NR (after year-end)(IRS)
Recovery Timeline: 6–12 months after Form 1040NR filing(IRS)
ITIN Required: Yes — IRS Form W-7, 7–11 week processing(IRS)
US Capital Gains Rate (Non-Resident): 15–20% on net gain (long-term); 37% on short-term(IRC §871)
Florida State Income Tax: 0% — Florida has no state income tax(Florida Statutes)
CRA Reporting Form: T1 Schedule 3 — Capital Gains (and Losses)(CRA)
Foreign Tax Credit Form (Canada): T2209 — Federal Foreign Tax Credits(CRA)
Canada-US Treaty Article: Article XIII — Capital Gains coordination(Canada-US Treaty)
Buyer's Withholding Agent Deadline: Must remit to IRS within 20 days of closing(IRC §1445(b))
Form 8288-A Use Case: Request reduced withholding before closing based on actual expected tax(IRS)
Canadian T1 FX Rate: Bank of Canada rate on the date of sale (USD → CAD conversion)(CRA IT-95R)

What Is FIRPTA and Why Does It Hit Canadians So Hard?

The Foreign Investment in Real Property Tax Act — FIRPTA — was enacted by the US Congress in 1980 to ensure that foreign nationals who sell US real estate pay their share of US capital gains tax. The mechanism is simple: rather than trusting the seller (who may leave the country before any tax bill arrives) to file and pay voluntarily, Congress put the obligation on the buyer. When a foreign person sells US real property, the buyer is legally required to withhold a percentage of the sale price at closing and send it directly to the IRS.

For Canadians, FIRPTA lands hard because of one counterintuitive feature: the withholding is calculated on the gross sale price, not the gain. A Canadian who bought a Fort Lauderdale condo for $380,000, sold it for $400,000, and made a modest $20,000 US gain still has $60,000 (15% × $400,000) withheld at closing. The IRS holds that $60,000 while the actual tax on a $20,000 long-term gain — at the 15% US capital gains rate for most non-residents — would be approximately $3,000. The remaining $57,000 is eventually refunded, but it takes 6–12 months to arrive.

This cash flow disruption is why FIRPTA deserves its own guide — and why careful planning before listing your US property can make a meaningful financial difference. With 54% of Canadian US property owners considering selling as of August 2025 (Royal LePage survey, n=2,500), understanding FIRPTA is no longer a niche concern. It is a live financial issue for hundreds of thousands of Canadians right now.

FIRPTA applies to all "US real property interests" — residential homes, condos, raw land, and commercial properties — owned by foreign persons, which includes Canadian citizens and permanent residents who are not US tax residents (green card holders or substantial presence test qualifiers). If you are a typical Canadian snowbird who spends fewer than 183 days per year in the US, you are a foreign person for FIRPTA purposes.

The 15% Withholding: How It Works at Closing

The mechanics of FIRPTA withholding are embedded in the US real estate closing process. When you accept an offer, your listing agent and the title company or closing attorney will know — or should know — that you are a foreign seller and that FIRPTA applies. Here is exactly what happens:

Seller certifies foreign status (or does not). You will sign a FIRPTA affidavit confirming you are a foreign person. If you falsely claim to be a US person to avoid withholding, you are committing federal fraud — the consequences are far worse than FIRPTA itself.
Buyer becomes the withholding agent. Under IRC §1445, the buyer is legally responsible for withholding. In practice, the title company or closing attorney handles it on the buyer's behalf. The buyer does not keep the money — they remit it directly to the IRS.
15% of gross proceeds is withheld at closing. If you are selling for $400,000, $60,000 is set aside in escrow. At closing, you receive $340,000 (plus any remaining deposit from the buyer, less other closing costs). The $60,000 is not paid to you — it goes to the IRS.
Buyer files Form 8288 and 8288-A within 20 days of closing. This is the withholding remittance form. You receive a copy of Form 8288-A, which you will attach to your eventual Form 1040NR as proof that withholding occurred. Keep this document — it is the paper trail for your refund.

There is no opt-out from FIRPTA withholding at closing unless you have obtained a withholding certificate in advance (discussed in Section 3) or a specific statutory exemption applies. If your buyer's agent or title company attempts to close a foreign-seller transaction without withholding, they are creating serious IRS exposure — for themselves, not just for you.

Can You Reduce or Avoid FIRPTA Withholding?

Yes — two primary mechanisms exist to reduce or eliminate FIRPTA withholding, and both require advance action before or immediately at closing.

The $300,000 Residence Exemption

Under IRC §1445(b)(5), if the sale price is $300,000 or less AND the buyer (or a member of the buyer's family) signs a certificate stating they intend to use the property as a principal residence for at least two of the first five years after closing, FIRPTA withholding drops to 0%. The buyer must sign this certificate in writing — it is not automatic.

A related provision reduces withholding to 10% (not 15%) when the sale price is $300,001–$1,000,000 AND the buyer signs the same principal-residence certificate. For most Canadian snowbirds selling Florida properties in the $300K–$500K range, this 10% vs. 15% distinction is material: on a $400,000 sale, it is the difference between $40,000 and $60,000 withheld.

Important: this exemption is buyer-driven, not seller-driven. The buyer must be willing to sign the residence certificate. An investor buyer, a corporate buyer, or any buyer who does not intend to personally use the property as a primary home cannot sign the certificate, and the full 15% withholding applies regardless of sale price.

Withholding Certificate via Form 8288-B

If the $300K exemption does not apply (your property is over $300,000, or your buyer is an investor), you can apply to the IRS for a withholding certificate before closing via Form 8288-B. A withholding certificate allows you to have the FIRPTA withholding reduced or eliminated based on your actual expected tax liability rather than the 15% gross calculation.

For example: if you are selling for $400,000, your adjusted cost basis is $350,000, and your actual US capital gains tax is $7,500 (15% × $50,000 gain), you can apply for a withholding certificate reducing the withholding from $60,000 to $7,500. The IRS is supposed to process 8288-B applications within 90 days — which is why this strategy requires you to start the process as early as possible after accepting an offer.

If closing occurs before the IRS approves the certificate, the full 15% must still be withheld (held in escrow by the closing agent) until approval arrives. A cross-border CPA who is experienced with FIRPTA can prepare the 8288-B application and monitor IRS processing to maximize the chance of pre-closing approval.

Sellers who are selling at a loss — where the actual US tax liability is $0 — should especially prioritize the withholding certificate. There is no benefit to having $60,000 withheld and then waiting a year to get it back when the IRS could have approved $0 withholding from the start.

Getting Your ITIN (IRS Individual Taxpayer ID)

To file Form 1040NR (your US non-resident income tax return) and receive your FIRPTA refund, you need an Individual Taxpayer Identification Number (ITIN) from the IRS. An ITIN is a 9-digit number issued specifically for people who need to interact with the US tax system but are not eligible for a Social Security Number.

You apply for an ITIN using Form W-7 (Application for IRS Individual Taxpayer Identification Number). Supporting documents required include a valid passport or government-issued photo ID, documentation of your foreign status, and a completed W-7 form. Processing time is 7–11 weeks when mailed directly to the IRS, or faster if you use an IRS-authorized Certifying Acceptance Agent (CAA) — a cross-border CPA or tax professional certified to process ITIN applications on your behalf without requiring original documents.

If you have previously received rental income from your US property and filed US returns in the past, you already have an ITIN. Check your prior returns or contact your cross-border CPA to confirm. Do not apply for a second ITIN — duplicate applications will delay everything.

Timeline advice: apply for your ITIN as soon as you decide to sell your US property — well before you list. There is no cost to the application, and having your ITIN in hand before closing eliminates a downstream delay in the refund process. If you list, accept an offer, and then realize you need an ITIN, you are adding 7–11 weeks to your refund timeline for no reason.

Recovering the Excess: Filing Form 1040NR

Form 1040NR is the US Non-Resident Alien Income Tax Return. This is the form on which Canadians report their US property sale, calculate their actual US capital gains tax, apply the FIRPTA withholding as a credit, and claim any refund of excess withholding.

The filing deadline for Form 1040NR when you have US-source income subject to withholding (which FIRPTA-withheld proceeds are) is April 15 of the year following the sale, with an automatic extension to June 15 available and a further extension to October 15 with Form 4868. For a sale that closes in November, you would typically file the 1040NR the following April, though the refund clock doesn't start until the IRS receives and processes the return.

On the 1040NR, you report:

Gross sale proceeds (as reported on Form 8288-A)
Your adjusted cost basis (purchase price + closing costs + capital improvements)
Net capital gain (proceeds minus basis)
US capital gains tax at 0%, 15%, or 20% depending on income level and holding period
FIRPTA withholding already remitted (from Form 8288-A)
Net refund due (withholding minus actual tax)

After filing, IRS processing of non-resident returns takes approximately 4–6 months. The refund is issued by cheque (mailed to your Canadian address) or by international wire if you arrange it. The IRS does not pay interest on FIRPTA refunds unless processing takes more than 45 days past the filing deadline — which it routinely does for non-resident returns. Budget for the refund to arrive 8–12 months after closing, and do not count on it in your short-term cash flow planning.

The Canada-US Tax Treaty: Preventing Double Taxation

The Canada-United States Convention With Respect to Taxes on Income and Capital — commonly called the Canada-US Tax Treaty — has been in force since 1980 and comprehensively covers the treatment of capital gains on real property. Article XIII is the operative provision for property sales.

Under the treaty, capital gains from the alienation of real property situated in the US are taxable in the US. Canada also taxes its residents on worldwide income, including capital gains from foreign property. Without the treaty credit mechanism, Canadians would owe tax to both governments on the same gain.

The treaty coordinates this by allowing the Canadian resident to claim a foreign tax credit for US federal income tax paid on the same gain. The credit is claimed on Form T2209 (Federal Foreign Tax Credits) and reduces your Canadian tax liability dollar-for-dollar up to the Canadian tax attributable to that foreign income.

The critical word is "claimed" — the treaty credit is not automatic. You must: (a) file Form 1040NR in the US and determine your actual US tax paid, (b) report the same gain on your Canadian T1 return, and (c) attach Form T2209 claiming the credit. If you file only in Canada and do not file in the US at all, you cannot claim the treaty credit, and you will pay full Canadian capital gains tax on the gain with no offset for the FIRPTA withholding sitting at the IRS. Both returns must be filed correctly and in the right sequence.

One nuance: the T2209 credit is limited to the lesser of the foreign tax paid and the Canadian tax on the same foreign income. If your US tax rate is higher than your marginal Canadian rate on that income, you cannot fully offset the excess US tax against other Canadian income — it is lost. Conversely, if your Canadian tax on the gain is higher than the US tax paid, you will owe the difference to CRA after claiming the T2209 credit.

Reporting the Sale to CRA: Schedule 3 and T2209

In the tax year that your US property sale closes, you must report the disposition on your Canadian T1 General income tax return. The relevant schedules are:

Schedule 3 — Capital Gains (and Losses): Lists the property disposition, proceeds, adjusted cost base (ACB), and net capital gain. The proceeds and ACB are expressed in Canadian dollars — convert from USD using the Bank of Canada exchange rate on the transaction date. Currency appreciation since purchase will show up as an additional gain beyond what you perceived in USD terms.
Form T2209 — Federal Foreign Tax Credits: Claims the credit for US federal income tax paid on the sale. The amount to enter is your actual US tax from Form 1040NR — not the FIRPTA withholding amount.
Form T1135 — Foreign Income Verification Statement: If you owned the US property for the full calendar year, you were likely required to file T1135 in prior years (if cost base exceeded CAD $100,000). In the year of sale, you still report the property on T1135 if it was held at any point in that tax year.

The CRA filing deadline is April 30 of the year following the sale. However, filing your T1 before your US 1040NR is finalized creates a timing problem: you need the actual US tax figure for the T2209. One solution is to file your Canadian return on time with an estimate (using your expected US tax) and then file a T1 adjustment (T1-ADJ) once your 1040NR is processed. Work with a cross-border CPA to sequence these filings correctly.

See our full guide to Canadian taxes on foreign property and the T1135 compliance guide for deeper coverage of the CRA reporting obligations on your US property.

Worked Example: The $400K Florida Condo Sale

The following example walks through a complete FIRPTA scenario for a typical Canadian snowbird. All figures are approximate and illustrative — your actual tax situation will vary based on purchase price, holding period, income, and currency rates.

The Facts

Original purchase price (2016): $280,000 USD (CAD/USD was 0.72 → ACB in CAD: ~$388,890)
Closing costs at purchase: $8,000 USD (CAD equivalent: ~$11,111 → added to ACB)
Capital improvements over 9 years: $15,000 USD (CAD equivalent: ~$18,750 at avg rate)
Total adjusted cost base (USD): $303,000
Total adjusted cost base (CAD): ~$418,750
Sale price (2025): $400,000 USD (CAD/USD is 0.70 → proceeds in CAD: ~$571,430)
Selling costs (agent commission, etc.): $24,000 USD
Net proceeds (USD): $376,000
Holding period: 9 years (long-term)

Step 1: FIRPTA Withholding at Closing

Gross sale price: $400,000 USD
FIRPTA withholding rate: 15%
Amount withheld: $60,000 USD
Cash received at closing: $400,000 − $60,000 (FIRPTA) − $24,000 (selling costs) = $316,000 USD
Note: The buyer certifies primary residence use but price > $300K → withholding is 10%, not 15% in this case
Revised withholding at 10%: $40,000 USD (if buyer certification applies)
Cash received at closing (with 10% rate): $400,000 − $40,000 − $24,000 = $336,000 USD

For clarity, the remainder of this example uses the 15% baseline of $60,000 withheld.

Step 2: US Capital Gains Tax (Form 1040NR)

Gross sale proceeds: $400,000 USD
Less: selling costs: ($24,000)
Net proceeds: $376,000 USD
Less: adjusted cost basis: ($303,000)
US net capital gain: $73,000 USD
Long-term capital gains rate (non-resident, 15% bracket): 15%
US federal capital gains tax: $73,000 × 15% = $10,950 USD
Florida state tax: $0
Total US tax: $10,950 USD
FIRPTA withheld: ($60,000)
US refund due: $49,050 USD (arrives 6–12 months after filing 1040NR)

Step 3: Canadian Capital Gains (T1 Schedule 3)

Canadian dollar proceeds: $400,000 USD × 1/0.70 = $571,428 CAD
Less: selling costs in CAD: $24,000 USD × 1/0.70 = ($34,286 CAD)
Net proceeds in CAD: $537,142 CAD
Less: Canadian ACB: ($418,750 CAD) — see facts above
Canadian capital gain: $118,392 CAD
Taxable capital gain (50% inclusion): $59,196 CAD
Marginal tax rate (Ontario resident, ~$120K other income): ~43%
Estimated Canadian tax before FTC: $59,196 × 43% = ~$25,454 CAD

Step 4: Foreign Tax Credit (T2209)

US tax actually paid: $10,950 USD = ~$15,643 CAD (at 0.70)
T2209 credit claimable (lesser of US tax paid or Canadian tax on same income): ~$15,643 CAD
Canadian tax after FTC: $25,454 − $15,643 = ~$9,811 CAD additional tax owed to CRA

Step 5: Summary — Total Tax and Net Proceeds

Cash at closing: $316,000 USD (with 15% FIRPTA held)
FIRPTA refund (arrives ~9 months later): +$49,050 USD
US tax paid: $10,950 USD
Additional Canadian tax owed to CRA: ~$9,811 CAD (~$6,868 USD)
Total effective tax (US + Canada, no double-count): ~$17,818 USD on $73,000 USD US gain
Net proceeds after all taxes and selling costs: approximately $349,182 USD

The key takeaway from this example: the total tax burden is meaningful but manageable — roughly 24% on the actual US gain. The cash flow disruption from FIRPTA ($60,000 withheld for 6–12 months) is the real operational challenge, not the tax itself. Plan accordingly: do not commit the FIRPTA-withheld amount to your next purchase or other obligations until the refund arrives.

Timeline: From Listing to Final Tax Recovery

Understanding the full FIRPTA timeline helps you plan cash flow for any subsequent purchase — whether in Mexico, Portugal, or elsewhere.

Before listing: Apply for ITIN (Form W-7) if you don't have one — 7–11 weeks. Engage a cross-border CPA. Gather original purchase documents, capital improvement records, and closing cost receipts for ACB calculation.
At listing: If you expect to sell above $300,000 and your buyer will likely not be a primary residence user, instruct your CPA to begin a Form 8288-B withholding certificate application once you have an accepted offer. If sale is under $300K, ensure buyer's agent knows about the residence-use exemption.
Month 0 — Closing: 15% (or 10%) withheld. Buyer files Form 8288 and 8288-A within 20 days. You receive Form 8288-A copy. You receive 85% (or 90%) of gross proceeds less selling costs.
Months 1–3: Assemble US tax documents. If you received any rental income in the sale year, gather those records. Your CPA prepares Form 1040NR.
Month 3–4 — File Form 1040NR: File before April 15 (or by June 15 automatic extension). FIRPTA withholding shown as credit. Net refund claimed.
Month 4 — File Canadian T1: Report Schedule 3 disposition. File T2209 with estimated US tax. May need to file T1-ADJ later once US refund confirms actual US tax paid.
Months 4–12 — IRS Processing: Non-resident returns take 4–6 months to process. FIRPTA refund issued by cheque or wire. Interest is paid only if IRS exceeds 45 days past filing deadline.
Month 9–15 — Final Resolution: US refund received. If T2209 estimate differed from actual, file T1-ADJ with CRA. Pay any remaining CRA balance. Full cycle complete.

If you are using the US sale proceeds to fund a purchase in Mexico or another country, plan your Mexico purchase financing around the 85% of gross proceeds you receive at closing — not the 100%. The FIRPTA refund is a bonus that arrives later. See our foreign property financing guide for strategies to bridge this gap.

Common FIRPTA Mistakes Canadians Make

Expecting to receive full proceeds at closing. The most common shock. Budget your post-sale cash flow around 85% of gross proceeds (or 90% if the $300K–$1M buyer-residency rate applies). The remaining 10–15% is the IRS's for a year.
Not having an ITIN ready. If you realize you need an ITIN after closing, you've added 7–11 weeks to your refund timeline unnecessarily. Apply before you list.
Assuming the buyer's agent or title company handles everything. They handle the withholding remittance. They do not file your 1040NR, handle your T2209, or sequence your Canadian and US returns. You need your own cross-border CPA.
Missing the withholding certificate window. Form 8288-B must be filed and ideally approved before closing. You cannot retroactively reduce withholding after the IRS has already received the 15%. If you're selling at a loss or with a very small gain, the withholding certificate can save you the 6–12 month refund wait entirely.
Using the FIRPTA withholding amount as your T2209 credit. The T2209 credit is your actual US tax paid, not the withholding amount. If $60,000 was withheld but your US tax was $10,950, you claim $10,950 on the T2209 — not $60,000.
Filing only in Canada and skipping the US return. Without a Form 1040NR, the FIRPTA withholding sits at the IRS indefinitely — there is no automatic refund process. The IRS will not proactively mail you a cheque. You must file to claim your refund.
Calculating the Canadian capital gain in USD. Schedule 3 is filed in CAD. You must convert both proceeds and ACB to CAD using Bank of Canada rates. Many Canadians are surprised by a larger-than-expected Canadian gain because the CAD/USD rate was more favorable at purchase (0.80+) than at sale (0.70), artificially inflating the CAD gain relative to the USD gain.
Not keeping capital improvement records. Capital improvements (renovations, new appliances, structural upgrades) are added to your adjusted cost basis, reducing your taxable gain. Without receipts and records, the IRS and CRA have no basis to accept these deductions.

Selling US Property and Considering a Move Abroad?

If you're among the 54% of Canadian US property owners considering selling, we can connect you with Canadian-specialist agents in Mexico, Portugal, Costa Rica, and beyond — and a cross-border CPA network for FIRPTA and CRA compliance.

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