Selling property in the United States as a non-U.S. individual is not just a financial decision. It also involves unique tax rules, paperwork, and timing. Many foreign sellers don’t realize that U.S. tax laws treat real estate differently for non-U.S. owners compared to U.S. taxpayers. With the right guidance, this process becomes much easier to understand and handle the right way.
In this guide, we explain in simple, clear language what non-U.S. sellers need to know, why taxes matter, and how working with experts like IVY Tax & Business Inc. can give you confidence and clarity throughout the process.
What You Need to Know Before Selling Real Estate in the USA
What Is FIRPTA and Why It Matters
If you’re not a U.S. citizen or resident, the sale of U.S. real estate falls under the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA makes sure that foreign sellers pay U.S. tax on the sale of U.S. real property. Under this rule, the buyer must hold back (withhold) a percentage of the sale price and send that amount to the IRS. This withheld amount acts as a pre-payment of the tax that you may owe.
In most cases, FIRPTA requires the buyer to withhold 15% of the gross sales price and send it to the IRS. If certain conditions apply — such as if the sale price qualifies for a primary residence exemption — a lower 10% withholding may apply.
What this means for you as a non-U.S. seller is that when your property closes, you won’t receive that full amount in your bank account at closing. Instead, the buyer or their title agent will send the 15% to the IRS on your behalf.
How FIRPTA Withholding Works
Here’s a step-by-step look at the withholding process:
- Verify Your Foreign Status – The buyer has to check whether you are a foreign person under U.S. tax law. This is different from immigration status and depends on how the IRS defines residency.
- Withhold a Percentage of Sale Price – Generally, the buyer must withhold 15% of the total sale price and send it to the IRS within about 20 days after closing.
- File Your U.S. Tax Return – After the sale, you will still need to file a U.S. tax return to report the sale and determine your actual tax owed. If the withholding is more than your actual tax liability, you may get a refund.
- Request Reduced Withholding Before the Sale – If you believe the tax you owe is less than the 15% withholding, you can apply for a withholding certificate from the IRS using Form 8288-B. If approved, this reduces the amount that must be withheld.
Practical Steps to Prepare for the Sale
Gather Your Tax ID and Documentation
Before selling, make sure you have:
- A U.S. Taxpayer Identification Number (TIN) — either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN)
- Proof of how you acquired the property and the cost basis (what you originally paid)
This documentation helps reduce delays at closing and speeds up your tax filing later.
Plan Ahead With Experts
Selling property as a non-U.S. owner adds tax complexity that many real estate agents and title companies don’t fully handle. This is why many non-U.S. clients work with tax professionals who understand FIRPTA withholding and can guide the whole process.
How IVY Tax & Business Inc. Helps You
Ivy Tax & Business Inc. specializes in helping individuals and business owners with U.S. tax compliance and planning. Their team offers services that include:
- U.S. tax return preparation and filing
- Tax planning and wealth strategies for individuals and businesses
- Guidance on tax issues related to real estate and investments
- Assistance with compliance and filings with the IRS
- Business formation, bookkeeping, payroll, and ongoing support
Working with professionals can save time, avoid costly mistakes, and make sure you follow IRS rules correctly when selling property.
Frequently Asked Questions About Selling U.S. Real Estate
What is FIRPTA withholding?
FIRPTA is a U.S. tax law that requires buyers to withhold part of the sale price when a foreign person sells U.S. real estate. It ensures that you pre-pay U.S. tax on gains from the sale.
Do I pay tax even if I didn’t make a profit?
Yes. FIRPTA withholding is based on the gross sale price, not your profit. It is a withholding, not the actual tax owed. You still file a tax return after closing to figure out your true tax liability.
Can FIRPTA withholding be reduced?
Yes. You can apply for a withholding certificate from the IRS before the sale if you expect your tax will be lower than the standard 15%.
Who is considered a foreign seller?
A foreign seller is generally anyone who is not a U.S. citizen, resident alien, or domestic entity for U.S. tax purposes. This includes nonresident aliens, foreign corporations, and other organizations.
What forms do I need to file after the sale?
You will file a U.S. income tax return (e.g., Form 1040-NR for individuals) to report the sale and tax owed. You may also need to work with your buyer to ensure that FIRPTA forms like 8288 and 8288-A were filed properly.
FAQs About IVY Tax & Business Inc.
What services does IVY Tax & Business Inc. offer?
IVY Tax & Business Inc. provides tax preparation, planning, and compliance services for individuals and business clients in the U.S., including real estate and investment tax advice, bookkeeping, payroll, and business formation.
Can they help non-U.S. sellers with FIRPTA?
Yes. While FIRPTA is a specific tax requirement, IVY Tax assists with understanding your withholding obligations, IRS filings, and tax returns so you are compliant and informed throughout the selling process.
How do I contact IVY Tax & Business Inc.?
You can reach their team via phone, email, or through their website contact page to set up a consultation or ask specific questions about selling U.S. property.
Disclaimer:
The information provided on this blog is for general educational and informational purposes only and does not constitute tax, legal, or financial advice. Reading or using this content does not create a CPA-client relationship. Tax laws and regulations change frequently and vary based on individual circumstances. You should consult a qualified tax professional regarding your specific situation before taking any action.