Selling U.S. Real Estate Owned from Abroad
A house, an apartment or a lot in the United States is being sold by an owner who lives abroad, or by the estate or the heirs of one who has died. The buyer must withhold 15 percent of the price unless the IRS reduces it beforehand, the gain is taxed in the United States, and some states add a withholding of their own. The firm’s attorneys obtain the reduction, handle the withholding and the return, and clear the title where the seller has died.
Law stated as of October 2026
In brief.
- The gain is taxed in the United States as if the seller were in business here, at the graduated rates, with a return on Form 1040-NR (section 897(a)).
- The buyer withholds 15 percent of the amount realized and pays it to the IRS within 20 days (section 1445(a); Treas. Reg. § 1.1445-1(c)); 10 percent where the buyer will live in the property and the price does not exceed USD 1,000,000, nothing where it does not exceed USD 300,000.
- A withholding certificate (Form 8288-B), applied for before the closing, limits the withholding to the tax actually due; the IRS generally acts within 90 days of a complete application, and the withheld amount stays in escrow until then.
- California withholds 3 1/3 percent of the price, or the tax on the gain if the seller so elects; Maryland collects 8.75 percent of the net proceeds from nonresident individuals at the recording of the deed. Virginia and the District of Columbia have no such withholding.
- Where the owner has died, the heirs take the property at its value at death (section 1014), the title has to be cleared in the state’s probate court, and the estate tax position of a nonresident decedent has to be settled before the proceeds leave the country.
What is happening
The United States treats a nonresident’s gain on the sale of real property located here as effectively connected with a U.S. business, so that it is taxed on a net basis at the graduated rates and reported on Form 1040-NR for the year of the sale (section 897(a)). To secure that tax the buyer, whoever it is, must deduct 15 percent of the amount realized, that is of the full price including any mortgage assumed, and report and pay it on Forms 8288 and 8288-A by the 20th day after the transfer (section 1445(a); Treas. Reg. § 1.1445-1(c)). No withholding is required where the buyer acquires the property as a residence for not more than USD 300,000, and 10 percent is withheld where the buyer acquires a residence for not more than USD 1,000,000 (section 1445(b)(5) and (c)(4)). Because the withholding is measured by the price and the tax by the gain, the seller or the buyer may apply before the closing for a withholding certificate on Form 8288-B; the IRS generally acts within 90 days of a complete application, which requires taxpayer identification numbers for all parties, and the amount withheld is held until the certificate issues (section 1445(c); Treas. Reg. § 1.1445-1(c)(2)).
Several states collect their own prepayment, and none of them honours the federal certificate. California withholds 3 1/3 percent of the sales price from any seller other than a California-based corporation or partnership, or an amount computed on the gain if the seller certifies it on Form 593 (Cal. Rev. & Tax. Code § 18662(e)); Maryland’s clerk will not record the deed of a nonresident seller without a payment of 8.75 percent of the net proceeds for individuals and 8.25 percent for entities, unless the Comptroller has issued a certificate of reduced or no withholding (Md. Code, Tax-Gen. § 10-912; Tax Alert of 13 April 2026). Virginia and the District of Columbia collect nothing at closing. Where the owner has died before the sale, two further matters precede it: the title passes only through the state’s probate court or a recognized foreign representative, and the estate of a nonresident decedent must file Form 706-NA and obtain the IRS transfer certificate where its U.S. assets exceed USD 60,000. The heirs sell with a basis equal to the value at death, so that the gain, and with it the tax, is often small, while the withholding on the price is not.
| Withholding | Rate and base | When and how |
|---|---|---|
| Federal, section 1445 | 15 percent of the amount realized; 10 percent for a residence up to USD 1,000,000; none up to USD 300,000 | By the buyer, paid with Forms 8288 and 8288-A within 20 days of the transfer |
| Federal, reduced | The tax actually due on the gain | Form 8288-B filed before the closing; decision generally within 90 days |
| California | 3 1/3 percent of the sales price, or the tax on the gain on election | By the buyer through the escrow, Form 593 |
| Maryland | 8.75 percent of the net proceeds (individuals), 8.25 percent (entities) | Collected by the clerk at the recording of the deed, unless the Comptroller certifies a lower amount |
| Virginia | None | |
| District of Columbia | None | |
| Final tax | Graduated rates on the net gain; long-term gain at the capital gains rates | Form 1040-NR for the year of the sale, with the withholding credited |
What has to happen, in order
- Establish the seller and the basis
Who holds the title, whether the seller is a nonresident, a foreign company or an estate, and the basis: cost and improvements, or the value at death for inherited property (section 1014).
- Obtain the identification numbers
An ITIN on Form W-7 for a foreign individual seller, an EIN for an estate or company; without them neither the certificate nor the refund can be processed.
- Apply for the withholding certificate
Form 8288-B before the closing, with the computation of the gain and the tax; notice to the buyer that the application is pending.
- Settle the state withholding
California’s Form 593 election on the gain; Maryland’s application to the Comptroller for a certificate of reduced withholding on Form MW506AE, which must be received at least 21 days before the closing.
- Clear the title where the owner has died
Probate or ancillary letters in the state, or the recognition of the foreign representative; the IRS transfer certificate for a nonresident decedent’s estate.
- Close
The buyer withholds the federal and state amounts, or the reduced amounts, and files the forms; the seller receives the stamped Form 8288-A.
- File the return and recover the excess
Form 1040-NR for the year of the sale with the Form 8288-A attached; the state return for the state’s withholding; the refund of any excess.
How the firm helps
The firm’s attorneys act for the seller abroad, for the estate or for the closing agent, and in California, Maryland, Virginia and the District of Columbia also handle the probate where the owner has died.
- The withholding certificate application and the computation behind it, prepared in the firm’s federal tax practice.
- The state withholding: the California election and the Maryland certificate.
- The identification numbers and the forms at the closing, in coordination with the title company or the escrow.
- The U.S. and state income tax returns for the year of the sale, and the refund of excess withholding.
- Probate, the transfer certificate and the estate tax return where the property is sold by an estate or by heirs.
What documents to prepare for the initial consultation
- The deed and the closing statement from the purchase, and invoices for improvements
- The current contract of sale or listing agreement, with the expected closing date
- The latest property tax bill and mortgage statement
- The seller’s passport, and any U.S. taxpayer identification number already issued
- U.S. tax returns filed for the property, including Forms 1040-NR and any net election
- Rental records, if the property was let
- Where the owner has died: the death certificate, the will and the document naming the representative
- Any correspondence from the title company, the escrow or the buyer’s attorney about withholding
- The bank details of the seller for the proceeds and the refund
Copies are sufficient. The firm sets up a secure portal for the documents and reviews them before the consultation.
No income tax convention of the United States removes its right to tax the gain on real property situated here; the convention of the seller’s country of residence relieves the double taxation at home, by credit or exemption. The estate tax conventions likewise leave U.S. real estate to the United States.
Describe the sale in a few lines
The state, the price, when the property was bought or inherited and the expected closing date are enough for the firm to say what will be withheld and what can be done about it.
