On this page8 sections
- Before closing: does FIRPTA withholding apply to this sale?
- Before closing: apply for the ITIN once the contract is signed
- Working out the FIRPTA withholding amount
- At closing: the escrow agent and Forms 8288 and 8288-A
- Joint owners and spouses: how the withholding is split
- After closing: filing Form 1040-NR to claim the credit
- Frequently asked questions
- Claim your FIRPTA refund with Nolly.com
A FIRPTA closing checklist for a non-resident seller has three stages. Before closing, the seller applies for an ITIN once a binding contract exists and works out the withholding. At closing, the buyer or closing agent withholds and sends the tax to the IRS with Forms 8288 and 8288-A. After closing, the seller files Form 1040-NR to claim the withheld amount as a credit.
The steps below follow that order. Each one names the form, who handles it and what the IRS FIRPTA withholding page says. Rules for corporations, trusts and partnerships differ and are not covered here.
Before closing: does FIRPTA withholding apply to this sale?
FIRPTA applies when a foreign person disposes of a U.S. real property interest. The IRS reads "disposition" broadly. It includes a sale or exchange, a gift, a liquidation, a redemption and other transfers. In most cases the buyer is the withholding agent, and the buyer must find out whether the seller is a foreign person. If the seller is foreign and the buyer fails to withhold, the buyer may be held liable for the tax. That is why buyers and closing agents ask about the seller’s status early.
- Confirm whether the seller is a foreign person.
- Identify who will withhold: the buyer, a purchaser’s agent or the settlement officer.
- Check whether a U.S. corporation or partnership owns the property, since that entity is then its own withholding agent.
- Note whether a spouse or co-owner is a U.S. person.
Before closing: apply for the ITIN once the contract is signed
The IRS will not issue an ITIN to a foreign seller before a legally binding sale contract exists, unless the seller has another valid reason for one. Once the contract is signed, the seller can file Form W-7 under Exception #4, Third-Party Withholding, Disposition by a Foreign Person of a U.S. Real Property Interest. A W-7 normally goes in with a tax return, but an exception like this one lets it go in without one. Where a withholding certificate is also requested, the IRS says the W-7 should include the completed Form 8288-B, sent together to the address in the W-7 instructions.
A valid passport is the only stand-alone identity document for a W-7. A Certifying Acceptance Agent verifies identity documents and sends the application to the IRS. Nolly.com, an IRS Certifying Acceptance Agent in Toronto, does that check on a video call. The IRS says to allow about 9 to 11 weeks when you apply from overseas or during tax season. Timing depends on the IRS.
Working out the FIRPTA withholding amount
The withholding is a percentage of the amount realized, not of the gain. The amount realized includes cash paid, the fair market value of other property transferred and any liability the buyer assumes or the property is subject to. The rate depends on the price and the buyer’s use, as set out in how the FIRPTA rate is set.
| Amount realized | Buyer’s use | Withholding |
|---|---|---|
| $300,000 or less | Buyer will live there | None |
| $300,001 to $1,000,000 | Buyer will live there | 10% |
| Any amount | Not the buyer’s home | 15% |
| Over $1,000,000 | Any use | 15% |
The home test needs the buyer to have definite plans to live there on at least half the days the property is used in each of the first two 12-month periods after the transfer. A seller who expects the withholding to exceed the tax can ask for reduced or no withholding, covered in the FIRPTA withholding certificate guide.
At closing: the escrow agent and Forms 8288 and 8288-A
On closing day, the buyer withholds through the escrow or closing agent, so the tax is deducted from what the seller would otherwise receive. The buyer then reports and pays it with Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests, and Form 8288-A, the statement of withholding for the seller.
- Confirm the closing agent knows the seller is a foreign person.
- If a withholding certificate was requested, check whether the IRS has answered. A seller living overseas can put the escrow company’s details in Box 5 of Form 8288-B so the closing agent gets IRS correspondence on time.
- If the home exception applies, make sure the buyer has told the closing agent about the plan to live there.
- Ask how the seller’s Copy B of Form 8288-A will be delivered.
Joint owners and spouses: how the withholding is split
When foreign and U.S. persons sell together, the amount realized is divided among the sellers based on their capital contributions. Spouses are treated as having contributed half each. Withholding then applies to the foreign owner’s share of the proceeds.
Where there are several foreign sellers, they can agree how the credit for the withholding is divided. They must ask for the agreed split by the 10th day after the date of transfer. Without an agreement, the buyer divides the credit evenly among the foreign sellers.
Putting title only in the U.S. spouse’s name does not settle the question in a community property state. The IRS says the answer depends on the facts and on that state’s community property law, and it points to Publication 555.
After closing: filing Form 1040-NR to claim the credit
FIRPTA withholding is a prepayment, not the final tax. The seller reports the sale on Form 1040-NR and claims the withheld amount as a credit against the tax on the gain. The sale belongs on the return for the year the disposition actually happened. The date on Copy B of Form 8288-A can differ: when a withholding certificate was requested, the IRS changes it to the date of its approval or denial letter. The seller still reports the sale in the year it closed. The filing steps are laid out in this step-by-step FIRPTA refund guide.
- Keep Copy B of Form 8288-A with the closing statement.
- File Form 1040-NR for the year of the sale and claim the withholding as a credit.
- Use the same ITIN on later returns. An ITIN not used on a federal return for three consecutive years expires.
Frequently asked questions
Yes. The IRS gives the example of a foreign person who sells the right to buy a house for $30,000 before closing. The person who buys that right must withhold 15% of the $30,000, which is $4,500, and send it to the IRS with Forms 8288 and 8288-A.
No. The exemption for a home bought for $300,000 or less looks at the total amount realized on the sale, not each seller’s portion. If the total is above $300,000, the exemption does not apply, even when every co-owner’s share is $300,000 or less.
A buyer who skipped withholding by relying on the home exception, then did not live there for the required days, can be liable for the failure to withhold if the foreign seller did not pay the full tax. The buyer is not liable if an unforeseeable change in circumstances caused it.
Generally yes. When a non-resident contributes U.S. real property to a foreign corporation for its stock, and the corporation has not made the IRC 897(i) election, the IRS treats it as a disposition subject to withholding on the amount realized. The stock received is not a U.S. real property interest.
Claim your FIRPTA refund with Nolly.com
Nolly.com is an IRS Certifying Acceptance Agent in Toronto. We prepare the U.S. return that claims back withholding taken at closing. Claim your FIRPTA refund. FIRPTA refunds at Nolly.com start from $499.
Source: IRS.gov, FIRPTA withholding.
This guide is general information, not tax advice. Rules change and every situation is different, so check the IRS page above or ask a qualified tax professional about your own case.
Published November 1, 2026. General information, not tax advice. Nolly Services Inc is a private company and is not part of the IRS.
