Can a Canadian seller get a refund of the 15% FIRPTA withholding after a 1031 exchange?

Three routes back, from fastest to slowest

FIRPTA withholding is a collection device. Section 1445 takes 15% of the price so the United States has something in hand before a nonresident files, and a completed exchange leaves little or no tax for it to be applied against. The question is how, and how soon, the surplus reaches you.

The first route avoids a refund altogether. If an application for a withholding certificate is submitted on or before the transfer date, Reg. section 1.1445-1(c)(2) lets the buyer hold the amount withheld until 20 days after the IRS mails its decision. A certificate confirming full nonrecognition means the buyer owes nothing to the IRS and releases the money. How long that takes, and what happens if the exchange period ends first, is on withholding certificate timing.

The second is the early refund in Reg. section 1.1445-3(g). The third is the ordinary credit on your US return. Which one you end up with usually depends on one fact: whether the Form 8288-B went in by closing day.

The early refund: a certificate issued after the transfer, and a four-item application

Reg. section 1.1445-3(a) says a certificate obtained after the transfer may authorize a normal refund or an early refund. Paragraph (g) sets the procedure: if more was withheld than the certificate requires, the transferor may apply for a refund of the excess, without interest, before the due date of the return, not counting extensions.

The application goes to the address in Reg. section 1.1445-1(g)(10), which the Form 8288-B instructions give as the Internal Revenue Service, P.O. Box 409101, Ogden, UT 84409, and must state in numbered paragraphs the transferor's name, address and identifying number; the amount the certificate requires to be withheld; the amount actually withheld, with a stamped copy of Form 8288-A attached; and the amount to be refunded. If the certificate application itself is filed after the transfer on the maximum tax liability basis, it can be combined with the refund application.

The early refund comes to you, not to your intermediary. If the exchange has already closed, the cash is yours to keep but it is not exchange property, which is the point made under the hypothetical below.

The return route: Form 1040-NR line 25f, with a six-month wait

The Instructions for Form 1040-NR direct you to enter tax withheld under section 1445 and shown on Form 8288-A on line 25f, and to attach a copy of every Form 8288-A to the front of the return. A nonresident with no US wages subject to withholding files by the 15th day of the sixth month after the year ends, June 15 for a calendar year, and by April 15 with such wages. The same instructions warn that refunds of tax reported on Form 8288-A may take up to six months to issue.

The stamped copy B of Form 8288-A is the key. The IRS page on reporting and paying FIRPTA tax says the IRS stamps it and sends it to the transferor, that a stamped copy will not be provided if the transferor's TIN is missing from the form, and that in that case the IRS mails Letter 3794 instructing the seller to apply for an ITIN. A seller without the stamped copy must attach substantial evidence of the withholding instead. Getting the number early is on whether you need an ITIN.

The return also has to carry Form 8824 and the section 897 statement described on whether a nonresident alien can do a 1031 exchange. Without that statement the deferral itself is at risk, and the refund with it.

What Canada credits is the US tax you finally pay, not the 15%

Under section 126(1) of the Income Tax Act, a Canadian resident may deduct from Canadian tax such part of any non-business-income tax paid to a foreign government for the year. The CRA's foreign tax credit folio is explicit about withholding: any portion of foreign tax that is paid but will be, or is, refunded is not tax paid for the year, and an overpayment is not allowable as a foreign tax credit.

So the Canadian return claims the US tax shown as finally due on Form 1040-NR, converted at the same rate used for the income itself, as paragraph 1.42 of the folio directs. If the exchange defers the whole US gain, that figure is zero, and Canada taxes the gain in the year of sale with nothing to credit. That mismatch, and the fact that the credit for a passive gain cannot be carried forward, are explained on whether a 1031 works for a Canadian owner and in the planned guide for Canadians selling US property.

Hypothetical: $120,000 withheld on an $800,000 sale, and where it lands

A Canadian resident sells a Florida rental for $800,000 on March 2, 2026 and completes a full exchange. The Form 8288-B was filed two days after closing, so the buyer remitted $120,000 to the IRS within 20 days and the intermediary received $680,000. All figures are hypothetical and rounded; model your own with a preparer who files in both countries.

The replacement closes on July 15 for $800,000, which means the exchanger adds $120,000 of outside cash to the intermediary before closing to reinvest the full price; otherwise the $120,000 that went to the IRS is value that never reached replacement property, and the shortfall is taxable to the extent of gain, as with leftover cash after an exchange. The exchanger then files Form 1040-NR by June 15, 2027 with Form 8824, the section 897 statement and the stamped Form 8288-A, claims $120,000 on line 25f against a US tax of zero, and waits up to six months for the refund. On the Canadian side the 2026 return reports the gain and claims no credit, because no US tax was finally paid for the year.

Before closing: the steps that decide which route you get

Snowbirds who split the year between the two countries have residency questions on top of this; those are in the planned guide for snowbird rental owners.

• File Form W-7 with Form 8288-B attached the day the sale contract is binding, so the application reaches the IRS on or before the transfer date.
• Put the buyer's duty to hold rather than remit, and the release to the intermediary, into the purchase contract and escrow instructions.
• If the money has already gone to the IRS, apply for the certificate anyway: issued after the transfer, it opens the early refund route.
• Budget outside cash equal to the withheld amount for the replacement closing, so the exchange reinvests the full price while the refund is pending.
• Give your Canadian preparer the Form 1040-NR, not the Form 8288-A, because the credit is for tax finally due.