Selling Your US Home as an NRI: FIRPTA Withholding Explained
Sell US property after becoming a nonresident and the buyer must withhold up to 15% of the gross price. Here's how FIRPTA works and how to get your money back.
Vikram Shah
Updated May 19, 2026 · 9 min read
You bought a home while working in the US, your plans changed, and now you're selling it — possibly after you've already moved back to India. Then your closing agent drops a surprise: the buyer is legally required to withhold 15% of the entire sale price and send it to the IRS. Not 15% of your profit — 15% of the gross amount. On a $600,000 sale, that's $90,000 frozen, even if your actual gain (and tax) is far smaller. This is FIRPTA, and while it feels punitive, it's recoverable if you understand the rules and plan ahead.
In a nutshell
FIRPTA requires buyers to withhold up to 15% of the gross sale price when the seller is a nonresident alien — it's a prepayment of tax, not the tax itself. If you're still a US tax resident when you sell, FIRPTA does not apply. Nonresidents can reduce the withholding with a Form 8288-B certificate and reclaim any excess by filing a 1040-NR. Lower rates apply for sales under $1M used as the buyer's residence.
Key takeaways
- FIRPTA withholding is up to 15% of the GROSS sale price, not your gain.
- It applies only when the seller is a nonresident alien — resident aliens are exempt.
- Withholding is a prepayment, not a final tax — you reconcile and refund the excess.
- Reduced rates: 0% if under $300k and buyer occupies; 10% for $300k–$1M with buyer occupancy; 15% otherwise.
- File Form 8288-B *before* closing to lower withholding to your actual expected tax.
- State withholding (e.g., California ~3.33%) may apply on top of federal FIRPTA.
What FIRPTA actually is
FIRPTA — the Foreign Investment in Real Property Tax Act — exists to make sure foreign sellers actually pay US tax on US real estate gains before the money leaves the country. Because the IRS can't easily chase a seller who's now in India, it shifts the duty onto the buyer, who must withhold a percentage of the price at closing and remit it to the IRS using Forms 8288 and 8288-A.
Crucially, the withholding is on the amount realized (the gross sale price), not on your profit. That's why it can vastly exceed the tax you actually owe — and why reclaiming the excess matters.
The key question: are you a resident or nonresident?
FIRPTA only applies to nonresident aliens. Your status at the time of sale decides everything:
- Still a US tax resident (green card, or meeting the Substantial Presence Test)? FIRPTA does not apply. You sell like any American and settle gains on your normal return.
- Already a nonresident (you've moved back to India and no longer meet the residency tests)? FIRPTA applies, and the buyer must withhold.
Timing can save you five figures. If you're close to the line, selling *while you're still a US tax resident* avoids FIRPTA withholding entirely. For some returning NRIs, selling before departure — or before residency lapses — is dramatically simpler than reclaiming withheld funds from abroad.
The withholding rates
| Sale price | Buyer will use as residence? | Withholding |
|---|---|---|
| Up to $300,000 | Yes | 0% |
| $300,001 – $1,000,000 | Yes | 10% |
| Any amount | No | 15% |
| Over $1,000,000 | Regardless | 15% |
The 0% and 10% reliefs require the buyer to sign an affidavit that they'll use the property as a residence for a set portion of the next two years.
How to reduce the withholding: Form 8288-B
Here's the tool that prevents your money from being needlessly frozen. Before closing, you (or your tax advisor) can file Form 8288-B, an Application for a Withholding Certificate, showing the IRS your *actual* expected gain and tax. If approved, the IRS authorizes withholding at the lower, realistic amount instead of 15% of the gross. This is essential when your real gain is small relative to the sale price (for example, you bought recently or are selling at a modest profit).
File it early — IRS processing can take 90 days or more, so start before you list if possible.
Getting your money back
If full withholding happened anyway, you recover the excess by filing a US nonresident return (Form 1040-NR) for the year of sale. You report the actual gain, calculate the real tax, and claim a refund of the difference between what was withheld and what you owed. You'll need an ITIN if you don't already have one.
Don't forget the India side
Selling US property as someone now living in India also has Indian tax implications: once ordinarily resident, India taxes your worldwide income, including this US capital gain. The DTAA and foreign tax credit prevent double taxation — you credit the US tax paid against your Indian liability. And when you move the proceeds to India, keep clean records of tax paid.
Frequently asked questions
Is FIRPTA withholding the actual tax I owe?
No. It's a *prepayment* of potential tax, calculated on the gross sale price. Your real tax is on the gain; you reconcile and refund the excess via Form 1040-NR.
How do I avoid 15% being frozen at closing?
File Form 8288-B before closing to have the IRS approve withholding at your actual expected tax, and/or sell while you're still a US tax resident, which exempts you from FIRPTA entirely.
Does FIRPTA apply if I still live and work in the US?
No. FIRPTA only applies to nonresident-alien sellers. Resident aliens (green card or Substantial Presence Test) are exempt.
How long does it take to get the withheld money back?
After filing your 1040-NR for the sale year, refunds typically take a few months. An approved 8288-B certificate avoids over-withholding in the first place.
The bottom line
FIRPTA isn't a penalty — it's a withholding mechanism, and a recoverable one. If you sell while still a US resident, it doesn't touch you. If you sell as a nonresident, file Form 8288-B early to right-size the withholding, then reclaim any excess with a 1040-NR. Plan the timing, get an ITIN ready, and coordinate the Indian side so your home sale funds your next chapter instead of getting stuck with the IRS.