US Capital Gains Tax for Non-Residents: FIRPTA Withholding, Exemptions, and Recovery
FIRPTA (Foreign Investment in Real Property Tax Act of 1980) is the U.S. tax law that dictates how non-residents are taxed on capital gains from selling U.S. real estate. Because the IRS cannot easily collect tax from you after you leave the country, they require the buyer to “hold back” a portion of the sale price as a security deposit.
This withheld amount is an advance payment toward your actual U.S. capital gains tax. This guide explains how that withholding works, how to reduce it, and how to recover any overpayment when you file your U.S. tax return.
Who this article is for:
This article is for non-resident sellers of US real estate. If you’re a US citizen or green card holder living abroad, see our guide on foreign capital gains tax for US expats. If you’re the buyer in a FIRPTA transaction, see our guide on Form 8288 for your withholding obligations.
Who Counts as a Non-Resident for FIRPTA?
For FIRPTA purposes, you’re a non-resident if you:
- Are not a US citizen
- Do not hold a US green card
- Do not meet the substantial presence test for the year of the sale
The IRS uses the term “Nonresident Alien” to describe this status. This is determined by your tax residency, not your citizenship or visa type. If you live outside the US most of the year and don’t have a green card, FIRPTA likely applies to your US property sale.
For more on how the IRS classifies non-citizens for tax purposes (including the distinction between Nonresident Aliens and Resident Aliens), see our guide on US taxes for foreigners.
How FIRBTA Works
When a non-resident sells U.S. real estate, the law shifts the responsibility to the buyer. The buyer is legally required to “hold back” a percentage of the sale price at closing and send it to the IRS on your behalf.
It is helpful to remember that this withheld amount is not the final tax. It’s a deposit. The seller’s actual capital gains tax is determined later when they file a US tax return (Form 1040NR). If the actual tax owed is less than the withheld amount, the seller can claim a refund.
The Reporting Sequence
- Sale closes: The buyer withholds the required percentage (usually 15%) from the sale proceeds before you receive your check.
- Buyer files Form 8288: Within 20 days of the sale, the buyer sends the withheld money to the IRS along with Form 8288.
- Buyer issues Form 8288-A: The buyer provides you with a stamped copy of Form 8288-A. This is your official proof that the tax was paid.
- Seller files Form 1040NR: The following year, you file a U.S. non-resident tax return to report the actual profit (capital gain) from the sale and calculate the exact tax owed.
- IRS processes refund: If the money held at closing was more than your actual tax bill, the IRS processes and issues your refund.
For the buyer’s side of this process, including their specific filing deadlines and liabilities, see our complete guide to Form 8288.
Who FIRBTA Applies To
FIRPTA applies when both of the following conditions are met:
- The seller is a non-resident: This includes any individual who is not a U.S. citizen, not a green card holder, and does not meet the “substantial presence test” (a calculation of days spent in the U.S.).
- The asset is a U.S. Real Property Interest (USRPI): This covers direct ownership of U.S. real estate, including homes, condos, land, and commercial buildings, as well as interests in mines, wells, or other natural deposits.
FIRPTA applies to both individual non-resident sellers and foreign corporations. Foreign corporations selling US real property are subject to a higher 21% withholding rate on certain distributions, but the basic mechanism is the same as for individuals.
When FIRPTA Does Not Apply
FIRPTA reporting and withholding requirements do not apply to:
- Sales by U.S. citizens or green card holders: These individuals follow standard domestic tax rules.
- Sales of U.S. stocks, bonds, or other personal property: While these may have other tax implications, they are not governed by FIRPTA.
- Sales of foreign real estate: Selling property located outside of the U.S. has no U.S. tax implication for non-residents.
FIRPTA Withholding Rates
The standard FIRPTA withholding rate is 15% of the gross sale price, not the profit (gain). This is a an important distinction: even if you sell the property at a loss, the buyer is still required to withhold 15% of the total price unless an exemption or a withholding certificate is in place.
There are three different rates that may apply based on the sale price and the buyer’s intended use of the property:
| Sale Price | Buyer’s Intended Use | Withholding Rate |
| $300,000 or less | Primary Residence | 0% (Exempt) |
| $300,001 to $1,000,000 | Primary Residence | 10% |
| $300,001 to $1,000,000 | Any other use (Investment, etc.) | 15% |
| Over $1,000,000 | Any use | 15% |
The Primary Residence Affidavit
For the 0% and 10% reduced rates to apply, the buyer must sign an affidavit stating they intend to use the property as a personal residence for at least 50% of the time for the first two years after the sale.
Because the buyer takes on personal liability to the IRS if this statement is found to be incorrect, many buyers (and their legal counsel) refuse to sign the affidavit even if they qualify. Sellers should prepare for the standard 15% rate unless they have a signed agreement from the buyer well in advance of closing.
FIRPTA Exemptions and Reductions
Non-resident sellers have four primary methods to reduce or eliminate FIRPTA withholding at the time of sale.
1. The Primary Residence Exemption
If the sale price is $300,000 or less and the buyer signs an affidavit stating they will use the property as their home, the withholding is reduced to 0%. This is the most straightforward path for lower-value residential sales.
2. The Withholding Certificate (Form 8288-B)
Since the standard 15% withholding is based on the total sale price rather than your actual profit, it often exceeds the tax you actually owe. You can apply for a Withholding Certificate to ask the IRS to reduce the withholding to match your expected tax bill.
- Timing: You must file Form 8288-B on or before the date of the sale.
- Escrow: If you file before closing, the buyer can keep the funds in an escrow account while the IRS reviews your application, rather than sending them immediately to the IRS.
- Processing: The IRS typically takes 90 days to issue a decision.
If you sell for $500,000 with a $100,000 actual gain, the standard 15% withholding is $75,000 — but your actual capital gains tax is closer to $15,000. A withholding certificate can align the withholding with your real tax, freeing up the $60,000 difference at closing.
3. Tax Treaty Benefits
The U.S. has income tax treaties with many countries, but they rarely eliminate FIRPTA withholding entirely. Most treaties specifically allow the U.S. to tax “income from real property” located within its borders.
- How it helps: While a treaty may not stop the 15% withholding at closing, it can often lower the capital gains tax rate that applies to your profit.
- Withholding Certificate: You can use a treaty’s lower tax rate as the basis for a Withholding Certificate (Form 8288-B). This proves to the IRS that your total tax bill will be lower than 15%, which can reduce the amount held back at closing.
- Documentation: You must provide the buyer with Form W-8BEN to certify your residency in a treaty country.
To see if your home country has an agreement that could lower your tax rate, see our complete guide to U.S. tax treaties.
4. Section 1031 Like-Kind Exchanges
If you plan to reinvest your sale proceeds into a new U.S. investment property, a Section 1031 Exchange allows you to defer your capital gains tax.
- Property Location Rule: Both the property you sell and the new property you buy must be located in the U.S. You cannot defer the gain by reinvesting in real estate outside of the United States.
- Requirements: You must use a “Qualified Intermediary” (a third party to hold the funds) and meet strict deadlines: 45 days to identify a new property and 180 days to complete the purchase.
- FIRPTA Interaction: A 1031 exchange does not stop FIRPTA withholding automatically. You must still apply for a Withholding Certificate to notify the IRS that the tax is being deferred. Otherwise, the buyer is still required to withhold 15% at closing.
Coordinating a 1031 exchange with FIRPTA requires a qualified intermediary, an early withholding certificate application, and tight timeline management. Errors are unforgiving — a missed deadline disqualifies the exchange entirely.
5. Status Change to Resident Alien
If the seller obtains a green card or meets the substantial presence test before the sale closes, they are no longer a non-resident for tax purposes. Resident aliens are taxed like US citizens and are not subject to FIRPTA withholding. Status change is rarely a planning option in practice (you generally don’t change immigration status to optimize a single transaction), but it does explain why some foreign nationals selling US property find that FIRPTA does not apply to them.
Other exemptions
A handful of additional exemptions apply in narrow circumstances:
- Sales by qualifying foreign governments
- Certain dispositions of US partnership interests where less than 10% of partnership assets are US real property
- Corporate dispositions where the corporation is not a US Real Property Holding Corporation
These are uncommon for individual sellers. If you believe one might apply, consult a tax professional.
How to Recover Withheld FIRPTA Amounts
Because the 15% withholding is based on the total sale price, it is rarely the final tax you owe. To get your overpayment back, you have to actively claim it by filing a U.S. tax return. The IRS will not issue this refund automatically.
The Recovery Process
- Obtain an ITIN: To file a U.S. return, you need an Individual Taxpayer Identification Number (ITIN). if you do not have one, you must apply using Form W-7. Since this can take 7 to 11 weeks to process, you should start this application as soon as the property goes under contract.
- File Form 1040NR: You must file this non-resident tax return for the year the sale occurred. On this form, you calculate your actual profit (sale price minus what you paid) and determine the exact U.S. capital gains tax owed.
- Attach Your “Receipt” (Form 8288-A): You must include the IRS-stamped copy of Form 8288-A that the buyer gave you at closing. The IRS will reject your refund claim if this document is missing.
- Claim Your Credit: You list the total FIRPTA amount already withheld as a “tax payment” on your 1040NR. Any amount that exceeds your actual tax bill is then marked as a refund.
- Receive Your Refund: For non-residents, the IRS typically takes 6 to 12 months to process and issue a refund check.
Important Deadlines
- Filing Date: For most non-residents, Form 1040NR is due June 15 of the year following the sale. However, if you also earned U.S. wages (like from a job in the U.S.), the deadline is April 15.
- Extensions: You can request a 6-month extension using IRS Form 4868, but this only extends the time to file your paperwork, not the time to pay any additional tax you might owe.
If you do not file Form 1040NR, the IRS keeps the full 15% withholding by default. To get your money back, you must complete the filing process.
State Tax Considerations
FIRPTA is a federal requirement, but it does not cover your state-level obligations. Most U.S. states impose their own taxes on real estate sales within their borders, regardless of where the seller lives. There are three primary state-level obligations for non-resident sellers:
1. State Income Tax on Capital Gains
Most states tax the profit from a real estate sale if the property is located in that state.
- Rates: These range from 0% (in states with no income tax like Florida, Texas, or Washington) to graduated rates that can exceed 13% in states like California.
- Calculation: This is separate from your federal tax. You must calculate your gain based on that specific state’s tax rules.
2. State-Level Non-Resident Withholding
Several states have their own version of FIRPTA. These states require the buyer (or the escrow agent) to withhold a percentage of the sale price or the gain and send it to the state tax agency.
Common State Withholding Examples for 2026:
- California: Generally requires 3.33% of the gross sale price or an elective amount based on the actual gain.
- New York: Requires an estimated tax payment (via Form IT-2663) based on the highest applicable tax rate, currently up to 10.9% of the gain.
- Hawaii (HARPTA): Requires a withholding of 7.25% of the gross sale price.
3. State Non-Resident Tax Filing
Just like with the IRS, state withholding is an advance payment, not a final tax. To get any overpayment back, you must file a non-resident state tax return.
- Independent Recovery: The state refund process is entirely separate from the federal one. Receiving your IRS refund does not mean your state refund is on the way; you must manage both filings individually.
For a deeper look at how US states tax non-residents and expats on real estate sales, see our state tax guide for expats.
Capital Gains on Non-Real-Estate U.S. Assets
FIRPTA applies only to U.S. real estate. If you own other U.S. assets, such as stocks, bonds, or partnership interests, different rules apply. In most cases, the tax treatment for these assets is more favorable for non-residents.
U.S. Stocks, Bonds, and Mutual Funds
Non-residents are generally exempt from U.S. capital gains tax on the sale of U.S. stocks, bonds, mutual funds, or ETFs. This is a significant tax advantage: even though the assets are U.S.-based, the profit from selling them is typically not taxed by the IRS.
The 183-Day Exception
There is a specific rule that can trigger a 30% flat tax on these gains. If you are physically present in the U.S. for 183 days or more during the tax year but are still considered a non-resident (for example, if you are on a specific G-4 visa), you must pay a 30% tax on your net U.S. capital gains.
For most people, spending 183 days in the U.S. automatically makes them a “resident alien” for tax purposes, which subjects their worldwide income to U.S. tax and makes this specific 30% rule irrelevant.
Dividends and Interest Income
While the sale of a stock might be tax-free, the income it produces is handled differently:
- Dividends: These are typically subject to a flat 30% withholding tax. If your home country has a tax treaty with the U.S., this rate is often reduced to 15% or 0%.
- Interest: Most U.S. interest, including interest from bank accounts or “portfolio interest” from bond, is fully exempt from U.S. tax for non-residents.
U.S. Partnership Interests (Section 1446(f))
If you sell an interest in a U.S. partnership that does business in the United States, you may be subject to tax.
- Withholding: Under Section 1446(f), the buyer must withhold 10% of the sale price and send it to the IRS.
- Purpose: This is very similar to FIRPTA; it ensures the IRS collects an advance payment of the tax you might owe on the partnership’s U.S. business activities.
For more on how US taxation works for non-residents across all asset types, see our US taxes for foreigners guide.
Common FIRPTA Mistakes to Avoid
FIRPTA mistakes can result in overpaid capital gains tax, delayed refunds, or in some cases lost recovery entirely.
Here are the most common mistakes we see at Greenback:
- Forfeiting your refund by skipping the 1040NR: The IRS will not automatically refund your overpayment. If you do not file Form 1040NR, the IRS keeps the full 15% withholding by default. You must file to prove you owe less and claim your money back.
- Missing the “Withholding Certificate” window: If your actual tax will be much lower than the 15% withholding, you must apply for a certificate on or before the date of closing. If you wait until after the sale, the buyer is legally required to send the full 15% to the IRS, and your only option is to wait months for a refund.
- Waiting too long to apply for an ITIN: You cannot file your tax return without an Individual Taxpayer Identification Number (ITIN). Because applications take 7 to 11 weeks, waiting until tax season to apply will significantly delay your refund.
- Weak documentation of what you paid (Cost Basis): The IRS calculates your tax based on what you can prove. Many foreign sellers lose money because they didn’t keep receipts for the original purchase, home improvements, or legal fees. Gather these records before you list the property.
- Assuming the buyer will sign the residency affidavit: Many buyers refuse to sign this document because it makes them personally liable if they move out early. Always plan for the full 15% withholding unless you have a signed agreement in hand before closing.
- Forgetting tax treaty benefits: You must provide Form W-8BEN at closing to claim a lower tax rate under a treaty. If you don’t, the buyer must withhold at the standard rate, and you’ll have to wait until you file your return to see the benefit.
- Overlooking state-level withholding: FIRPTA only covers your federal tax. Many states have their own withholding rules and tax returns. Failing to plan for these can lead to a surprise bill at the closing table.
- Applying FIRPTA to stocks or bonds: FIRPTA applies only to U.S. real estate. Non-residents often mistakenly think their brokerage account sales need this same treatment, but those sales follow a completely different (and usually tax-free) set of rules.
When to Consult a Tax Professional
FIRPTA transactions are complex because they involve federal capital gains tax, state-level rules, and international tax treaties. While real estate attorneys or title companies handle the legal transfer of the property, they often do not have the cross-border expertise to manage the tax outcomes.
A cross-border tax professional helps you navigate the FIRPTA timeline to ensure you don’t leave money on the table.
How a professional helps before closing
- Choosing the right rate: Determining if you qualify for the 0% or 10% reduced rates before you sign the final papers.
- Reducing upfront withholding: Filing Form 8288-B to get a withholding certificate, which can save you thousands in “locked-up” cash at closing.
- Applying treaty benefits: Verifying if your home country’s treaty can lower your tax rate and preparing the necessary W-8BEN forms.
- Coordinating 1031 exchanges: Ensuring your tax-free exchange isn’t derailed by automatic FIRPTA withholding.
How a professional helps after closing
- Handling the ITIN: Managing the 7-to-11-week application process for your tax ID number.
- Filing the 1040NR: Preparing your non-resident return to accurately calculate your profit and claim your refund.
- Managing state refunds: Coordinating state-level filings (like in CA, NY, or HI) to recover state withholding.
- Tracking your money: Monitoring the 6-to-12-month refund process and responding to any IRS questions.
Greenback’s accountants specialize in tax for non-residents and U.S. expats. We regularly manage FIRPTA transactions and file the returns necessary to get your withholding back. Learn how Greenback helps foreign nationals whether you’re planning a US property sale, currently in escrow, or already closed and ready to file for refund.
FIRPTA mistakes are expensive, but preventable.
Frequently Asked Questions
Non-residents are taxed on the gain (sale price minus cost basis) at standard US capital gains rates: 0%, 15%, or 20% for long-term gains depending on the gain amount, or ordinary income rates for short-term gains. FIRPTA withholding (typically 15% of the sale price) is an advance payment toward this tax. The actual capital gains tax is calculated on Form 1040NR after the sale, and any excess withholding is refundable.
The buyer is legally responsible for withholding the FIRPTA amount from the seller’s sale proceeds and remitting it to the IRS. However, the economic cost of FIRPTA falls on the seller, the withheld amount is taken out of the proceeds the seller would otherwise receive. The buyer is functionally a withholding agent acting on behalf of the IRS. If the buyer fails to withhold, the IRS can hold the buyer personally liable for the unpaid tax.
The most common FIRPTA exemption is the primary residence exemption: when a property sells for $300,000 or less and the buyer signs an affidavit stating they will use it as their personal residence, withholding drops to 0%. Other exemptions include sales by qualifying foreign governments, certain corporate distributions, and sales of partnership interests where less than 10% of the partnership’s assets are US real property. Tax treaties may also reduce the underlying capital gains tax, which can support a withholding certificate even if the treaty doesn’t directly exempt FIRPTA.
Yes, FIRPTA can be reduced to 0% on sales of $300,000 or less if the buyer signs an affidavit stating they will use the property as a primary residence. Without that affidavit, the standard 15% rate applies regardless of sale price.
Three paths reduce or eliminate FIRPTA withholding: (1) the primary residence exemption for sales of $300,000 or less with a buyer affidavit, (2) a withholding certificate from the IRS that reduces withholding to your projected actual tax, and (3) tax treaty benefits if your country has a relevant treaty with the US. Note that “avoiding” withholding does not avoid the underlying capital gains tax, it just changes how much is withheld upfront.
Multiply the gross sale price by the applicable rate (15%, 10%, or 0% depending on sale price and buyer’s use). FIRPTA is calculated on the sale price, not the gain. Even at a capital loss, the standard 15% withholding applies unless the seller has obtained a withholding certificate or qualifies for an exemption.
The buyer is legally responsible for withholding the FIRPTA amount from the sale proceeds and remitting it to the IRS using Form 8288 within 20 days of the sale. If the buyer fails to withhold, the IRS can hold them personally liable for the unpaid tax.
A FIRPTA withholding certificate is an IRS-issued document (obtained via Form 8288-B) that authorizes reduced or eliminated FIRPTA withholding when the seller’s actual US capital gains tax will be less than the standard 15%. Sellers should apply before closing to maximize the benefit. Processing typically takes 90 days.
Yes, if the FIRPTA withholding exceeded your actual US capital gains tax liability on the sale. File Form 1040NR for the year of the sale, attach Form 8288-A from the buyer, and claim the FIRPTA amount as a tax payment. The IRS will refund any excess. Refund processing for non-residents typically takes 6 to 12 months.
Yes. FIRPTA applies to all US real property interests held by non-residents, including commercial buildings, raw land, and rental properties. The primary residence exemption does not apply to commercial property because it requires the buyer to use the property as a personal residence.
US tax treaties may reduce or eliminate FIRPTA withholding for residents of treaty countries. Treaty benefits typically require Form W-8BEN to be provided at closing. The specific reduction depends on the treaty’s real estate provisions, which vary by country. Verify with a tax professional before assuming treaty benefits will apply.
No. Resident aliens (green card holders or non-citizens who meet the substantial presence test) are taxed like US citizens for federal income tax purposes and are not subject to FIRPTA withholding when selling US real estate. FIRPTA applies only to non-resident sellers. If your residency status changed during the year of sale, see our guide on dual-status taxpayers for how this affects your filing.
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