BorderBird
App →
United States / IRS

What happens to my money when I sell my US rental as a non-resident?

FIRPTA withholding applies. When a foreign person disposes of a US real property interest, the buyer is required to withhold 15% of the gross amount realised — the sale price, not the profit. On a $400,000 sale that is $60,000 held back regardless of whether you made anything on the property.

Who this applies to: Non-resident aliens selling US real property.

Key facts
Rate
15% of gross sale price
Withheld by
The buyer
Basis
Amount realised, not the gain
Reduce it
Withholding certificate, applied for before closing

How it works

You recover the excess by filing a US return for the year and reconciling to your actual gain, but that is a long time for a large sum to sit with the IRS.

Reduced rates and exemptions exist in some circumstances, particularly for lower-value residences the buyer intends to occupy.

There is also a withholding-certificate process that can reduce the amount held back up front where your actual tax will clearly be lower — but the application has to be made before closing.

Where people get caught

Almost nobody applies for the withholding certificate in time, because the sale process moves faster than the paperwork. Start it when you list, not when you accept an offer. Canada taxes the same gain as well, so the foreign tax credits have to line up — which is another reason the ownership structure chosen at purchase matters years later.

Source: FIRPTA — IRC §1445; IRS guidance on withholding certificates.

Terms used here

FIRPTA1040-NR

Related questions

I'm Canadian and buying a US rental. What am I missing on tax?
By default the IRS takes 30% of gross rents with no deductions. The §871(d) election moves you to a net basis.
Should I hold my US rental property in an LLC as a Canadian?
Usually not. The US disregards a single-member LLC; the CRA treats it as a corporation. The mismatch can produce double taxation.
Does departure tax apply to my Canadian rental property when I emigrate?
No. Canadian real property is excluded from the emigration deemed disposition — Canada keeps the right to tax the gain when you actually sell.

Frequently asked questions

Is FIRPTA a tax or a deposit?
It is withholding against your eventual US tax liability, not a separate tax. You reconcile it on your US return and recover any excess — the practical problem is timing, not permanence.
Does FIRPTA apply if I sell at a loss?
The withholding obligation is based on the amount realised, so it can apply even where there is no gain. That is precisely the situation the withholding certificate process is designed for, and why applying before closing matters.

This is general information, not tax or legal advice. Rules change and your situation is specific — verify with the CRA or IRS, or with a cross-border advisor, before acting. ← All answers

BorderBird helps cross-border landlords track rent and prepare CRA NR4 and IRS Schedule E filings — see how it works.