Cross-Border Individuals
Selling US Property as a Foreign Owner: FIRPTA Withholding Explained
Under FIRPTA, when a foreign person sells US real estate, the buyer must withhold a percentage of the gross sale price — commonly 15% — and remit it to the IRS. This is withholding, not the final tax. The seller can often reduce it in advance with a withholding certificate, or recover any excess by filing a US return to settle the actual gain.
FIRPTA surprises foreign sellers because the withholding is based on the sale price, not the profit — so it can far exceed the real tax. This page explains how it works and how to avoid overpaying.
What FIRPTA requires
The Foreign Investment in Real Property Tax Act requires the buyer (as withholding agent) to withhold a portion of the amount realized on the sale of US real property by a foreign person and send it to the IRS. The commonly applied rate is 15% of the gross sale price, with some variation depending on the price and the buyer's intended use.
Why it often overshoots the real tax
Because the withholding is a percentage of the full sale price rather than the gain, a seller with a modest profit — or even a loss — can have far more withheld than they ultimately owe.
| Tool | What it does |
|---|---|
| Withholding certificate (applied for before/at closing) | Asks the IRS to reduce withholding to the expected actual tax |
| Filing a US tax return after the sale | Settles the true gain and refunds any over-withheld amount |
Practical timeline
The seller typically needs an ITIN, and a withholding certificate request should be made before or around closing to be effective — once funds are withheld and remitted, recovery comes through filing a return. Coordinating the certificate, the ITIN, and the closing is where a knowledgeable preparer saves the seller from a long wait on a large refund.
Frequently asked questions
How much is FIRPTA withholding?
Commonly 15% of the gross sale price, with some variation by price and the buyer's intended use. It is withholding against the eventual tax, not the final tax itself.
Can I reduce FIRPTA withholding?
Often yes. Applying for a withholding certificate before or around closing can lower the amount withheld to your expected actual tax, avoiding a large over-withholding.
How do I get back too much withheld?
By filing a US tax return for the year of sale to report the actual gain. Any amount withheld beyond the real tax is refunded through that return.
Have a question about your own situation?
Talk it through with a licensed Enrolled Agent — free, and in your language.
Request a free consultationThis page is general educational information, not legal or tax advice for your specific situation, and does not create a client relationship. Tax rules, amounts, forms, and procedures change — verify against current IRS guidance or consult a qualified tax professional before acting.