Fifteen percent of the price,
not fifteen percent of the gain
FIRPTA withholding is calculated on the gross sale price regardless of whether the sale produced a profit. It is recoverable, and it has to be planned for rather than discovered.
Before you read on
- General information as of August 2026, not tax advice. A CPA experienced with non-resident owners should confirm your position before you list.
- Rates and procedures are set by federal statute and IRS practice and can change. Confirm current requirements at the time of sale.
- Everything that makes this exit expensive is decided years earlier, at the purchase.
Step 1What FIRPTA does, and to whom
The obligation sits on the buyer, which is why closings enforce it without exception.
The Foreign Investment in Real Property Tax Act requires a buyer purchasing US real property from a foreign person to withhold — generally 15% of the gross sale price — and remit it to the IRS. Because the liability for failing to withhold falls on the buyer, there is no practical scope for negotiation at the closing table.
It is a payment on account rather than the tax itself. The actual liability is computed on the gain, and the difference is refunded when a return is filed for the year of sale — which means the following filing season, not at closing. For a seller planning to redeploy the proceeds immediately, that timing gap is the real problem.
Step 2Reducing the withholding before it happens
| Item | On a $2,000,000 sale |
|---|---|
| Gross sale price | $2,000,000 |
| FIRPTA withheld at 15% | $300,000 |
| Brokerage and seller costs (8-10%) | $160,000 – $200,000 |
| Approximate net cash at closing | $1,500,000 – $1,540,000 |
| Recovered later if tax due is lower | Refund on filing |
Illustrative only. Actual figures depend on the gain, basis, depreciation recapture and any applicable treaty.
Where the expected tax is less than 15% of the price — common, since tax applies to the gain rather than the price — a seller may apply to the IRS for a withholding certificate authorising a reduced amount. The application must be made before or at closing and takes time to process. Sellers who start it after accepting an offer frequently find the closing arrives first.
Step 3The records that decide your basis
Neither the certificate application nor the return can be prepared efficiently without one, and obtaining it takes time.
The closing statement establishing what you paid, including the costs that are added to basis rather than deducted.
Renovations, system replacements and structural work reduce the taxable gain. Every dollar needs an invoice rather than a recollection.
Depreciation claimed during ownership is recaptured on sale, raising the taxable amount above the simple price difference.
Brokerage, transfer taxes and legal fees reduce the gain. Keep the closing statement.
Improvements without documentation are difficult to defend. Store the folder somewhere that survives a change of accountant.
Step 4The alternatives to selling
Holding is also a decision, and a 1031 exchange is a third option most owners never price.
Given the friction, some owners conclude they should hold. That is reasonable for a property that covers its costs — but holding leaves the US estate tax question open, and for a non-resident that exposure begins above an exemption of $60,000 on US-situs assets.
For investment property, a 1031 exchange can defer the gain entirely by rolling into another US property. The deadlines are strict — 45 days to identify and 180 days to close — and the structure must be in place before the sale closes. Note that an exchange and FIRPTA interact rather than cancel: a foreign seller still meets the withholding rules, and the coordination between intermediary, closing attorney and any certificate application has to be arranged in advance.
Generally yes. The withholding is calculated on the gross price rather than the gain, which is precisely why the withholding certificate procedure exists.
By filing a US tax return for the year of sale. The withheld amount is credited against the actual liability and any excess refunded.
Long enough that it must be started well before closing. Confirm current processing expectations with your CPA when you decide to list.
Budget 8-10% of the price: brokerage, New York City and State transfer taxes, attorney fees and building charges — before any FIRPTA withholding.
Yes. Depreciation claimed during ownership is recaptured on sale, which raises the taxable amount above the simple difference between purchase and sale price.
Filing generally produces a better outcome than accepting withholding on gross rent, and it keeps the basis and depreciation records that make the exit computation straightforward.
RELATED GUIDES
Let’s talk first
If a sale is coming, talk to us before you list — the withholding certificate and the records both need lead time.
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.