What Is FIRPTA and How Much Tax Is Withheld When a Foreigner Sells US Property?

The buyer, not you, withholds 15% of the gross sale price and sends it to the IRS within 20 days of closing, under the Foreign Investment in Real Property Tax Act. Fifteen percent of the price you sold for, not your profit, which is the detail that catches people at the closing table.

Two lower tiers exist, both tied to how the buyer will use the property. If the amount realized is $1,000,000 or less and the buyer intends the home as a personal residence, occupying it at least half the time over each of the first two years, the rate drops to 10%. If it is $300,000 or less under the same residence test, withholding falls to zero. A rental sold to an investor gets none of that relief; it sits at 15% regardless of price.

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01Can I Reduce the Withholding Before Closing?

Yes, through Form 8288-B, a withholding certificate the IRS reviews against your actual expected gain rather than the full sale price. A seller who bought a property for $500,000 and sells for $520,000 has a real gain of $20,000, but a straight 15% withholding on the full price would hold back $78,000, tying up cash that was never owed. File Form 8288-B with a documented basis and gain calculation well ahead of closing; the IRS review takes time and a rushed filing routinely delays the deal it was meant to protect.

02Do I Get the Withheld Money Back?

If the amount withheld exceeds your actual US tax liability, yes, but not at closing. You report the sale on a nonresident return the following tax season, claim the withholding as a credit against the tax actually owed, and the IRS refunds the difference. Treat the gap between closing and that refund as a real cash-flow event, especially if the certificate route above was not used. Reporting the sale correctly is also where income tax filing support earns its keep, since a nonresident return has its own rules foreign sellers rarely file on their own.

03Does This Apply If I Own the Property Through an LLC?

If the LLC is single-member and disregarded for tax purposes, the IRS looks through it to you, the foreign owner, and FIRPTA applies exactly as if you sold the property directly. A multi-member LLC taxed as a partnership sits under a different withholding regime tied to the partnership itself rather than a straightforward FIRPTA sale, and the two are genuinely not interchangeable. We will not collapse that distinction into a simple yes; it is a question for an advisor before you sign, not after.

A foreign seller also needs a US taxpayer number to file for a certificate or claim a refund; if you do not already hold one, an ITIN is usually the first document to sort out, before the closing date is fixed rather than during escrow. Start here if a sale is on your calendar and we will map the withholding before the buyer's attorney does.

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