Selling U.S. Property
Foreigners Selling Property in the U.S.: Your Guide
The sale of a U.S. property by a foreign national falls under the jurisdiction of the Foreign Investment in Real Property Tax Act (FIRPTA). The IRS, through FIRPTA, ensures that the tax obligations from the sale are collected.
Steps in Selling U.S. Property by a Foreigner
1 Listing and Selling Your Property
Once your property is listed with a realtor, choose a title/escrow company that is experienced in working with foreign sellers and with the requirements of FIRPTA. This company will work with both you and the purchaser.
Once the purchaser’s offer has been accepted and the conditions and contingencies removed, move on to step
2 Withholdings & Exemptions
The IRS designates the purchaser as the withholding agent. The purchaser is required to withhold any taxes owing and remit the withholding to the IRS.
Refer to Withholding Rates & Exemptions to determine which rate or exemption applies to your situation.
3 FIRPTA Compliance Forms
The relevant FIRPTA compliance forms are to be completed before the sale is closed.
Foreigners will report the sale of U.S. property to the IRS using Forms 8288, 8288-A, and 8288-B.
Forms 8288 and 8288-A are required for all sales. If your sale qualifies for an exemption or reduced withholding, you will use Form 8288-B to apply for this reduction/exemption.
An exemption or reduction might also apply if the purchaser is an individual and will use the property as a principal residence.
Once all compliance forms have been completed, the sale will close. The forms are to be submitted within 20 days of closing.
4 ITIN Number Requirement
The IRS requires that non-residents who need to file a U.S. tax return have an ITIN (Individual Taxpayer Identification Number). A U.S. tax return is required for the sale of property by a non-resident.
An ITIN is issued by the IRS to U.S. non-residents who:
- Do not have a U.S. Social Security number.
- Do not meet the requirements to obtain the number.
The IRS cannot apply the amount withheld from your sale until you file your tax returns.
If you have a valid ITIN, the IRS will:
- Verify the details of the withholding and the cheque submitted by your title/escrow company.
- Apply the withheld amount to your account using your ITIN.
- Send you Form 8288-A (your final tax slip) with a locator number. This slip is required to file your U.S. tax returns.
If you do not have a valid ITIN:
- Apply for it as soon as possible after the closing of your sale. According to the IRS, “You will receive a letter from the IRS assigning your tax identification number usually within seven weeks if you qualify for an ITIN and your application is complete.” We have found, though, that it usually takes several weeks longer.
- The amount withheld is not applied until you have notified the IRS of your new ITIN.
The IRS will send you Form 8288-A (your final tax slip) with a locator number. This slip is required to file your U.S. tax returns.
5 File All Tax Returns
The following tax returns are to be individually filed by each seller:
- U.S. federal personal income tax return.
- U.S. state personal income tax return, if applicable.
- Personal tax return for your country of residence. You may be able to claim a foreign tax credit on your resident country tax return.
Our FIRPTA Services
Dealing with all the FIRPTA requirements can be a real challenge. Although the information on this site is very helpful for those who want to take on the challenge, there’s a strong chance that you’ll hit some obstacles or perhaps leave out some important steps.
Save yourself time, stress, and problems by having FIRPTA GLOBAL do the work. We’re FIRPTA experts who know all the detailed steps, and we enjoy helping sellers breathe easy.
Full FIRPTA guidance through every stage. We will:
File all required FIRPTA forms.
Provide your title or escrow company with all required FIRPTA documentation.
If required, obtain an ITIN for each seller.
File the U.S. federal and state (if applicable) tax returns for each seller.
Let FIRPTA GLOBAL Handle Your FIRPTA Needs
Our services can be provided virtually or in person. Contact us to start the process!