Tax Considerations When Selling U.S. Property as a Non-Resident
Don’t Let the IRS Take More Than They Should
You found a buyer.
You’re ready to close.
But if you’re a non-resident selling U.S. real estate…
💸 You might be in for a surprise.
It’s called FIRPTA, and it’s not optional.
🇺🇸 What Is FIRPTA?
FIRPTA = Foreign Investment in Real Property Tax Act.
In short: the IRS doesn’t want foreign sellers to slip away without paying U.S. taxes.
By default, 15% of the gross sales price gets withheld at closing.
Not 15% of the profit — 15% of the whole deal.
| Sale Price | Tax Withheld at Closing (15%) |
| $500,000 | $75,000 |
| $2,000,000 | $300,000 |
| $10,000,000 | $1,500,000 |
✅ This gets reported on Form 8288.
❌ If you ignore it — escrow will withhold it anyway.
🧾 Can You Reduce the Withholding?
Yes. If you’re eligible, you can apply for a FIRPTA Withholding Certificate using:
📄 Form 8288-B – request a reduction or exemption from the 15%
📌 Must be filed before closing (or simultaneously)
⏳ The IRS will review and (usually) respond in 90 days
Common scenarios for reduced withholding:
- Actual tax liability is lower than 15%
- Selling at a loss
- Property held in a U.S. corporation or partnership
- Buyer signs affidavit for personal residence under $300K
📉 Actual Tax Owed vs. Withholding
FIRPTA is just a withholding mechanism.
It doesn’t determine your final tax bill.
After the sale, you still need to:
- File a U.S. tax return (Form 1040-NR or 1120-F)
- Report the sale and actual gain or loss (Schedule D or Form 4797)
- Claim a refund for any over-withheld amount
✅ CPA Tip: Get a U.S. ITIN early — you’ll need it to file for refund.
🏢 Entity Structures Matter
How your property is held changes everything.
| Ownership Type | FIRPTA Withholding | Final Tax Return |
| Direct individual (non-U.S.) | 15% on gross | Form 1040-NR |
| Foreign Corporation | 15% + branch tax risk | Form 1120-F |
| U.S. LLC (disregarded) | Treated like individual | 1040-NR |
| U.S. Corp or REIT | Depends – may be exempt | 1120 |
⚠️ Selling through a foreign corporation? You may also face Branch Profits Tax.
💡 Bonus: State Tax Matters Too
FIRPTA is federal, but don’t forget about state-level tax.
Some states (like CA, NY, FL) require separate withholding or estimated payments.
Example:
- California: 3 1/3% withholding on sale price
- New York: Form IT-2663 required
- Texas: No state income tax — no additional withholding
✅ Summary: What You Should Do
- Know your withholding risk
- Consider applying for a reduced withholding certificate
- Get a U.S. ITIN
- File a U.S. return to reconcile the tax
- Work with a CPA who understands international real estate transactions
👋 Need Help?
We work with global real estate investors to minimize FIRPTA pain, file timely forms, and recover overpaid withholding quickly.
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