FIRPTA: Selling US Property as a Foreign Owner

When a foreign person sells US real estate, the buyer generally must withhold 15% of the sale price and send it to the IRS under FIRPTA (the Foreign Investment in Real Property Tax Act). That money is a prepayment of your US tax, not the tax itself: you get back whatever exceeds your actual tax by filing a US return, or you can ask the IRS before closing to lower the withholding with a withholding certificate.

If the property is in New York, a nonresident seller usually also pays New York estimated income tax on the gain at the deed recording. This guide covers both, with worked numbers.

Who FIRPTA applies to

FIRPTA withholding applies when the seller is a foreign person: generally a nonresident alien individual, a foreign corporation, or a foreign partnership, trust or estate. A US citizen who lives abroad is not a foreign person for this purpose. A green card holder or someone who meets the substantial presence test is usually a resident alien, not a foreign person.

The buyer is normally the withholding agent. The IRS says the buyer must find out whether the seller is foreign, and if the buyer fails to withhold from a foreign seller, the buyer can be liable for the tax. That is why sellers are asked either to sign a non-foreign certification (a sworn statement with the seller's US taxpayer identification number) or to plan for withholding.

How much is withheld

Withholding is a percentage of the amount realized, not of your profit. The amount realized is the cash paid, plus the fair market value of other property transferred, plus any liability the buyer assumes. In a normal sale that is the contract price.

The $300,000 residence exemption, read carefully

The zero-withholding rule depends on the buyer, not on you. All of these must be true:

• The buyer is an individual (not an LLC or other company).
• The amount realized is $300,000 or less. The test looks at the amount realized on the whole transaction.
• The buyer or a family member has definite plans to live there for at least 50% of the days the property is used during each of the first two 12-month periods after the sale. Days the property sits empty are not counted. A day counts if a member of the buyer's family (as defined in tax code section 267(c)(4)) lives there.

The same residence test is what lets a buyer withhold 10% instead of 15% on a price between $300,000 and $1 million. Few NYC homes sell for $300,000 or less, so the 10% tier matters more here. Ask your attorney how the buyer's plans will be documented.

Other exceptions to withholding

The IRS lists several more situations where withholding is generally not required. The ones that come up in home sales:

• The seller certifies, under penalties of perjury, that it is not a foreign person, giving its name, US taxpayer ID and address.
• The buyer receives an IRS withholding certificate that excuses or reduces withholding.
• The seller gives written notice that no gain or loss is recognized under a nonrecognition rule in the tax code or a treaty (the buyer must file a copy with the IRS by the 20th day after transfer).
• The amount realized is zero, or the buyer is a US, state or local government.

Withholding certificates: lowering the withholding up front

Withholding is a blunt tool. If you bought a condo for $1,100,000 and sell it for $1,200,000, the buyer withholds $180,000 even though your federal tax on roughly $100,000 of gain (before selling costs) will be far lower. A withholding certificate fixes that.

1. 1

   Apply on Form 8288-B

   The buyer, the buyer’s agent or the seller can apply. Grounds include that full withholding would exceed your maximum tax, that your gain is exempt, or that you have an agreement with the IRS to pay the tax. A seller who applies must give the buyer written notice on the day of the transfer or the day before.
2. 2

   Get a taxpayer ID if you don’t have one

   The application must show the US taxpayer identification number of every party. A seller who is eligible for an ITIN can attach the completed Form 8288-B to Form W-7. The W-7 instructions say a seller applying this way also attaches a copy of the sales contract or closing statement, so the ITIN request follows a signed deal.
3. 3

   Wait for the IRS

   The IRS normally acts within 90 days after it has all the information it needs. Line 5 of Form 8288-B lets you choose the address where the IRS returns the certificate, which helps if you live abroad. An application that isn’t substantially complete, for example one with no actual or estimated transfer date, is rejected.
4. 4

   If it’s still pending at closing

   The buyer must still withhold the full amount at closing, but doesn’t have to send it to the IRS until 20 days after the IRS mails the certificate or denial. The closing agent usually holds the money in escrow until then. If the application was filed mainly to delay payment, interest and penalties run from the 21st day after closing.

Getting the withheld tax back

1. Closing day

   Buyer or closing agent withholds

   15% or 10% of the amount realized, or a lower amount under a withholding certificate.

2. Within 20 days

   Buyer files Form 8288 with Copies A and B of 8288-A

   And pays the withheld tax to the IRS (later if a certificate application is pending).

3. After processing

   IRS stamps Copy B of Form 8288-A

   It is mailed to the seller at the address on the form. If your taxpayer ID is missing, the IRS first writes to ask for one and sends the stamped copy once you provide it.

4. Next filing season

   You file a US income tax return

   For example Form 1040-NR for a nonresident individual, attaching stamped Copy B. Tax is figured on your actual gain; the excess withholding is refunded.

Without a stamped Copy B, the IRS says you must attach substantial evidence of the withholding (such as the closing statement) and a statement with the required details. The Form 8288 instructions also allow the stamped copy to be attached to an application for early refund, and a withholding certificate issued after the transfer can authorize an early refund.

New York: nonresident estimated tax at the deed

New York has its own rule, separate from FIRPTA, and it applies to any nonresident of New York State, including a US citizen who lives in New Jersey. A nonresident individual, estate or trust selling New York real property must estimate tax on the gain and pay it when the deed is recorded, using Form IT-2663. Co-op shares use Form IT-2664 instead.

• For 2026 transfers, the estimated tax is the gain times 10.90%, the highest state rate for the year.
• No payment is due if the property qualifies in full as your principal residence under the federal home sale exclusion (IRC §121), or for certain foreclosure transfers.
• The payment is credited when you file your New York nonresident return. The state says it can't be refunded before you file that return.

Use Roofy's nonresident seller estimated tax calculator to estimate the New York payment, and the seller net proceeds calculator to see what reaches your bank account.

Worked example: a foreign owner sells a Manhattan condo

A nonresident alien bought a condo for $1,000,000 and sells it in 2026 for $1,200,000 to a buyer who will live there. Assume $90,000 of selling costs and no improvements, so the gain is about $110,000.

The federal tax on $110,000 of gain will be much lower than $180,000, so this seller would probably apply for a withholding certificate before closing, or wait for a refund after filing Form 1040-NR. Transfer taxes, the broker and your mortgage payoff come out too; see NYC seller closing costs.

Checklist before you list

• Confirm whether you are a foreign person for tax purposes, and whether you are a New York nonresident.
• Find your purchase price and improvement records so your basis and gain can be calculated.
• Start the ITIN and withholding certificate process with a tax professional as soon as you have a signed contract.
• Make sure your attorney and the closing agent know there will be FIRPTA withholding, so the escrow and timing are in the contract.
• Keep the closing statement and the stamped Form 8288-A for your return.