Last reviewed: July 2026
The rule in one breath
When a 'foreign person' (non-U.S. individual or certain foreign entities) disposes of U.S. real property, the BUYER must withhold tax — generally 15% of the GROSS sales price — and remit it to the IRS shortly after closing (Forms 8288/8288-A). The buyer is personally liable if withholding was required and skipped. In practice, the settlement agent runs the mechanics — which is why 'is the seller foreign?' is on our intake for every single file.
The exceptions that matter
- Non-foreign seller: a U.S. person signs a certification of non-foreign status — no withholding. (Status can surprise: green-card holders are generally U.S. persons; a single-member 'foreign' LLC may be disregarded to its owner.)
- $300,000 residence exception: price ≤ $300k AND the buyer will use it as a residence under the occupancy tests → withholding can drop to zero. $300,001–$1M with the same use → 10% instead of 15%. Buyer certifications required — and buyers should understand what they're signing.
- Withholding certificate: when the actual tax will be less than the withholding (high basis, low gain), the IRS can authorize a reduced amount — apply EARLY; pending applications typically escrow the 15% rather than remit it.
Mechanics at the table
The withholding comes out of the seller's proceeds on the settlement statement; we prepare and transmit the IRS package; the stamped 8288-A returns to the seller as the credit voucher for their U.S. tax return, where the real tax gets computed and any excess refunds. ITINs matter at the filing stage — foreign sellers without one should start that process (with their tax professional) at listing, not at refund time.