15% of the price is held back,
whatever the profit was
The most expensive surprise in a cross-border sale, and the one most easily reduced if it is dealt with before the contract.
Before you read on
- General information, not tax advice. Confirm your position with a US tax adviser.
- Reinvent NY works in New York real estate and does not provide tax services.
Point 1What the rule actually does
The Foreign Investment in Real Property Tax Act makes the buyer responsible for withholding tax on a purchase from a foreign seller. The buyer, not the seller, is liable to the IRS if it is not withheld, which is why no closing agent will let it slide.
The base is the gross sale price. A seller who bought at $1,900,000 and sells at $2,000,000 has made $100,000 and will have $300,000 withheld. The cash difference is found at closing, and it is not returned until a return is filed for that tax year.
Point 2The rates and the exemptions
| Situation | Withheld | Condition |
|---|---|---|
| Standard sale | 15% | Applies unless something below does |
| Price $300,000 or less | 0% | Buyer must intend to use it as a residence |
| Price $300,001 to $1,000,000 | 10% | Same residence condition |
| Seller certifies non-foreign status | 0% | Seller is a US person or US entity |
| Withholding certificate granted | Actual tax due | Form 8288-B, filed before closing |
| Sale at a loss, certificate granted | Often 0% | Must be evidenced and approved in advance |
The residence exemptions depend on what the buyer intends to do with the property, not on what the seller wants. They cannot be relied on until the buyer has signed the declaration.
Point 3The withholding certificate
Asks the IRS to agree in advance that the tax owed is less than the statutory withholding, and to permit the lower figure. Where the gain is small, or the sale is at a loss, the reduction is the whole amount.
It must be filed on or before the closing date, and the IRS takes roughly 90 days to respond. Start it when the property goes on the market, not when a contract appears.
If the application is pending at closing, the full amount is held in escrow rather than remitted, and released when the certificate arrives. That requires the closing agent to agree to hold it.
15% goes to the IRS. You recover the excess by filing Form 1040-NR for that tax year, which means waiting until the following filing season and then for the refund. Twelve to eighteen months is normal.
Point 4New York adds its own
New York State requires a separate estimated tax payment from a non-resident seller of New York property, filed on Form IT-2663 at closing. It is calculated on the estimated gain rather than the gross price, and it is in addition to the federal FIRPTA withholding. Other states operate similar rules with different forms and rates.
A single-member LLC owned by a foreign person is disregarded for these purposes, so withholding still applies. A US corporation is a US person and does not trigger FIRPTA, but brings its own tax consequences, including on distributions. Structure decisions belong with a cross-border adviser before purchase, not at sale.
Yes. It is a credit against your US tax liability for the year, claimed on the return. If it exceeds the tax, the balance is refunded.
The withholding still applies by default, because it is calculated on the price. This is exactly the case a withholding certificate is for.
The test is US tax residency, not citizenship or immigration status. Someone who meets the substantial presence test may be a US person for this purpose even on a temporary visa.
Let’s talk first
If you are selling US property and are not a US taxpayer, tell us the timing and we will flag what has to start before the contract.
RELATED GUIDES
Recent transactions
A sample of the sales, purchases and rentals we acted on in 2025 and 2026.
Real estate brokerage services are provided through R New York.
Important notice
The figures on this page are general information as of August 2026 and do not represent an offer, a quote, or a guarantee of any transaction terms. Reinvent NY does not provide legal, tax, or investment advice. Confirm anything material with an attorney and a CPA before you act on it. Nothing here is a solicitation to invest, and no return is promised. Real estate brokerage services are provided through R New York.