FIRPTA when a seller is not a US tax resident

When a seller is a foreign person for US tax purposes, federal law (FIRPTA) requires the buyer to withhold part of the sale price and send it to the IRS. The usual rate is 15% of the price, not of the gain. Escrow handles the paperwork, but the rules matter to buyers and sellers.

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Who counts as a foreign person

• A nonresident alien, meaning someone who is not a US tax resident. FIRPTA turns on tax status, not citizenship or where you were born.
• A US citizen or green card holder is not a foreign person, even if they live abroad.
• Someone who lives in the US and meets the IRS substantial presence test is a US resident for this rule.
• Foreign companies, partnerships, trusts, and estates also count.
• A seller who is not a foreign person signs a certification of non-foreign status with a US taxpayer ID. Escrow collects it.

How much the buyer withholds

• 15% of the sale price in most sales.
• 10% if the price is $1 million or less and the buyer, or a member of the buyer's family, will live in the home.
• 0% if the price is $300,000 or less and the buyer will live in the home. Few Peninsula and South Bay homes sell in this range.
• To live in the home means the buyer plans to use it on at least 50% of the days it is used in each of the first two years after closing.

Who is responsible

The buyer is liable if the money is not withheld. Escrow usually withholds it from the seller's proceeds and files Forms 8288 and 8288-A with the IRS within 20 days of closing. Buyers should never skip this step to win a deal.

Getting money back

• The withholding is a prepayment, not the final tax. The tax itself is on the gain.
• Before closing, the seller can ask the IRS for a withholding certificate on Form 8288-B to lower the amount to the expected tax. If the application is filed by closing, escrow can hold the money until the IRS decides.
• After the sale, the seller files a US nonresident tax return (Form 1040-NR) to report the gain and claim any refund.
• The seller needs a US taxpayer ID: a Social Security number or an ITIN, applied for on Form W-7. An ITIN can take weeks, so apply early.

California withholds too

California withholds 3 1/3% of the sale price for the Franchise Tax Board when the seller is not a California resident, unless an exemption applies (Form 593). This is in addition to FIRPTA.

Read about selling taxes in California

Sellers who live in Germany

The United States and Germany have an income tax treaty. Under it, the US can tax a gain on US real estate. How Germany treats the same gain depends on your situation and the treaty. Talk to a tax advisor who works in both countries before you list.

Sean speaks German and can walk you through the sale in German. He does not give tax advice.

Plan ahead

• Tell Sean and escrow early if anyone on title is not a US tax resident.
• Apply for an ITIN early if you do not have a US taxpayer ID.
• Ask a US tax advisor about Form 8288-B before you accept an offer.
• Buyers: expect escrow to ask whether the seller is a foreign person and whether you plan to live in the home.

Sources: IRS: FIRPTA withholding, IRS: Exceptions from FIRPTA withholding, California Franchise Tax Board: Real estate withholding, IRS: Germany tax treaty documents.

General information as of October 21, 2026, not legal or tax advice. Rules change and local ordinances differ. Confirm the details for your property with the agency named above, an attorney, or a tax advisor.