Last Updated on April 30, 2026
Selling property in the United States as a non-resident can come with complex tax obligations.
From calculating capital gains to understanding FIRPTA withholding and filing requirements, it’s important to know what applies before and after the sale.
This guide breaks down the essentials.
How U.S. Capital Gains Are Calculated
Capital gains refer to the profit made when you sell a property for more than you originally paid.
To calculate your capital gain:
Capital gain = Sale price – (purchase price + allowable costs).
Allowable costs may include:
- Legal and closing fees
- Property improvements (not maintenance)
- Selling expenses (agent fees, etc.)
Capital gain tax on investment property
If the property was rented or held as an investment, the gain is fully taxable.
Depreciation claimed during ownership may also increase your taxable gain through depreciation recapture.
The tax rate for capital gains on estate depends on whether the gain is classified as short-term or long-term (explained below).
Non-residents are subject to U.S. federal tax and possibly state tax.
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Short-Term vs. Long-Term Capital Gains Tax
There’s quite a big difference between short term and long term capital gain, and the length of time you owned the property determines how your gain is taxed.
Short term vs long term capital gain
- Short-term: Property held for 1 year or less
- Long-term: Property held for more than 1 year
Short term capital gain tax
Short-term gains are taxed at ordinary income tax rates, which can be significantly higher.
Long term capital gain tax
Long-term gains benefit from reduced tax rates, typically:
- 0%, 15%, or 20% depending on income level
For most foreign sellers, long-term treatment results in a lower tax liability.
Can Foreign Sellers Reduce or Avoid FIRPTA Withholding?
One of the biggest concerns for non-resident sellers is FIRPTA.
But what is FIRPTA in real estate?
FIRPTA (Foreign Investment in Real Property Tax Act) requires buyers to withhold a portion of the sale price when purchasing U.S. property from a foreign seller but only if the property sales price exceeds $300,000.00.
If it does not exceed this amount, the buyer may choose not to withhold the FIRPTA and the final reconciliation is made on the tax return. In case a withholding was made, the seller must receive Form 8288-A from the buyer.
Please note that Form 1099-S was designed for resident aliens but in case you receive one, it can also substantiate sales price and tax withholding.
Typically: 15% of the gross sale price is withheld.
FIRPTA withholding certificate
You may apply for a withholding certificate to reduce or eliminate this amount if the actual tax due will be lower.
A certificate isn’t mandatory, but it’s highly recommended if:
- Your expected tax is less than 15% of the sale price
- You want to avoid overpaying upfront
Without it, you’ll need to wait until filing your tax return to claim a refund.
What About State Taxes?
In addition to federal tax, many states impose their own capital gains tax.
Capital gain state tax
State tax rules vary widely. Some states:
- Tax capital gains as ordinary income
- Have withholding requirements similar to FIRPTA
Capital gain tax by state
States like New York and California are known for higher tax rates, while others (like Florida or Texas) have no state income tax.
Capital gain tax California
California, for example, taxes capital gains at regular income tax rates, which can be among the highest in the U.S.
Tax Treaties: Can You Avoid Double Taxation?
Foreign sellers often worry about being taxed twice.
US capital gain tax
The U.S. generally has the right to tax gains from U.S. real estate, even for non-residents.
Capital gain tax on rental property
If the property was rented, the gain is still taxable in the U.S., and prior rental income should also have been reported annually.
Tax treaties
Many countries have tax treaties with the U.S. that:
- Prevent double taxation
- Allow you to claim a foreign tax credit in your home country
However, treaties typically do not eliminate U.S. tax on real estate sales.
Do I Have to File a U.S. Tax Return After Selling Property?
Yes, this is a crucial step many sellers overlook.
Capital gain tax after selling house
Even though FIRPTA withholding is applied at closing, it is not your final tax bill.
Capital gain tax on selling a house
You must file a U.S. tax return to:
- Report the actual gain
- Calculate the true tax owed
- Claim a refund if too much was withheld
Failing to file can lead to penalties and difficulty recovering overpaid tax.
FAQs
Is the 15% withholding my final tax bill?
No. It’s a prepayment of tax. Your actual liability may be lower (or occasionally higher), which is reconciled when you file your tax return.
Can I reduce the FIRPTA withholding before closing?
Yes. By applying for a FIRPTA withholding certificate, you may reduce or eliminate the amount withheld at closing.
What if I lived in the property as my primary residence?
You may qualify for the primary residence exclusion (up to $250,000 or $500,000 for couples), provided you meet ownership and usage tests—even as a non-resident in some cases.
Do I need an ITIN to sell my U.S. property?
Yes. A valid Individual Taxpayer Identification Number (ITIN) is required to:
- Process the FIRPTA withholding
If you don’t have one, you’ll need to apply before or during the sale process.
Selling U.S. property as a foreign owner involves more than just closing the deal, it requires careful tax planning, compliance, and timely filing.
👉 PTI Returns provides specialist support for non-resident property owners, helping you minimise tax, stay compliant, and recover any overpaid withholding.