Short answer
A buyer purchasing US real property from a foreign person must withhold 15 percent of the amount realized under IRC section 1445(a), and the amount realized is the sale price, not the profit. Holding the property through a US-formed single-member LLC does not move you out of that rule: Treasury Regulation section 1.1445-2(b)(2)(iii) states that a disregarded entity may not certify that it is the transferor, and the owner is treated as the transferor instead. That is the trap, and it decides which of three withholding rates applies and whether the number on the closing statement can still be reduced before you sign.
Key takeaways
- Withholding is 15 percent of the amount realized, which the IRS defines as the cash paid, plus the fair market value of other property transferred, plus any liability the property is subject to immediately before and after the transfer. It is not 15 percent of your gain.
- A disregarded single-member LLC cannot sign the certification of non-foreign status. The regulation puts the owner in the transferor seat, and a non-resident owner is a foreign person.
- Two lower rates exist, and both require the buyer to be acquiring the property as a residence: zero up to $300,000, and 10 percent above that up to $1,000,000.
- The withholding certificate on Form 8288-B can reduce the number to your actual tax, but the statute gives the IRS 90 days to act on a complete application, and an application is not complete without taxpayer identification numbers for every party.
- The buyer is the withholding agent and can be held liable for the tax if withholding does not happen, which is why closing agents treat the affidavit as a gating document.
Before you start
- Confirm how your LLC is classified for US tax purposes. A single-member LLC that has made no entity classification election is disregarded, and that changes who signs.
- Check whether you or your entity already holds a US taxpayer identification number, because the certificate application stops without one.
- Get the closing date in writing. Three of the deadlines here run from the date of transfer, not from the contract date.
Who this is for
- Non-residents who bought US property in the name of a US LLC and are now selling
- Foreign owners who assumed a US entity made them a domestic seller
- Anyone who is told at closing to hand over 15 percent of the sale price and is not sure that is correct
The 15 Percent Comes Off the Price, Not the Profit
The number that surprises people is not the rate. It is the base the rate is applied to. Section 1445(a) of the Internal Revenue Code, the withholding arm of the Foreign Investment in Real Property Tax Act (FIRPTA), makes the buyer withhold on the amount realized.
The IRS spells out what that means: the cash paid, plus the fair market value of other property transferred, plus the amount of any liability assumed by the buyer or to which the property is subject immediately before and after the transfer.
So a property that sells for $600,000 and leaves the seller with $40,000 after paying off a mortgage still produces $90,000 of withholding at the default rate. The rate applies to the $600,000, not to the $40,000. Even a sale at a loss produces withholding, because the calculation never asks whether there was a gain.
That gap between what is withheld and what is actually owed is the entire reason the withholding certificate exists. First, though, the question of who is actually the seller.
Your Disregarded LLC Cannot Sign the Affidavit
The usual way to stop FIRPTA withholding is simple. The seller hands the buyer a certification of non-foreign status, signed under penalties of perjury, stating that the seller is not a foreign person. The IRS says that certification has to carry the seller's name, US taxpayer identification number, and home address (office address if the seller is an entity). The buyer takes the affidavit, withholds nothing, and the closing proceeds.
Owners who bought through a US LLC often assume they are on the easy side of that. The entity was formed in Delaware or Florida or Wyoming, it holds the deed, and it is unquestionably a domestic entity. Signing a piece of paper saying so looks like a formality.
The regulation closes that door explicitly. Treasury Regulation section 1.1445-2(b)(2)(iii) says a disregarded entity may not certify that it is the transferor of a US real property interest, because the disregarded entity is not the transferor for US tax purposes. It then says who is: the owner of the disregarded entity is treated as the transferor and must provide the certificate of non-foreign status.
For a single-member LLC owned by a non-resident, that sentence relocates the whole question. The signature line belongs to the owner, the owner is a foreign person, and a foreign person cannot truthfully sign a non-foreign affidavit. The withholding applies.
The regulation goes further and makes the point unavoidable at closing. A domestic entity signing a non-foreign certification has to include in that certification a statement that it is not a disregarded entity. There is no wording in which a disregarded LLC quietly passes.
What the entity does and does not change
A US LLC still does what people usually form it for. It holds title, it can keep your personal name off the deed in counties that record the entity as grantee, and it can outlive a single transaction. What it does not do is change who the seller is for FIRPTA. Section 1.1445-2(b)(2)(iii) treats the owner as the transferor, and the owner's status is the one that counts.
Three Rates, and the Condition Attached to Two of Them
The 15 percent figure is the default, not the only rate. Two reductions sit in the statute, and both of them depend on the buyer's plans rather than the seller's.
Section 1445(c)(4) substitutes 10 percent for 15 percent on three conditions together: the property is acquired by the buyer for use as a residence, the amount realized does not exceed $1,000,000, and the full exemption in subsection (b)(5) does not already apply. That exemption is the third rate. Section 1445(b)(5) removes withholding entirely when the buyer acquires the property for use as a residence and the amount realized does not exceed $300,000.
Both conditions turn on the buyer, and that is the part a seller cannot control. If the buyer is purchasing the property to rent it out rather than to live in it, neither tier applies and the rate stays at 15 percent. The zero rate goes one step further and requires the buyer to be an individual.
The IRS spells that occupancy test out. The buyer or a member of the buyer's family must have definite plans to reside at the property for at least half of the days the property is used by any person during each of the first two 12-month periods after the transfer. Days the property sits vacant are not counted.
| Rate | Amount realized | Condition on the buyer | Authority |
|---|---|---|---|
| 15% | Any amount | None. This is the default | IRC 1445(a) |
| 10% | More than $300,000 and not more than $1,000,000 | Buyer acquires the property for use as a residence | IRC 1445(c)(4) |
| 0% | Not more than $300,000 | Buyer is an individual acquiring the property as a residence, with the half-of-days occupancy test met for two 12-month periods | IRC 1445(b)(5) |
FIRPTA withholding rates on the amount realized, and what each one requires
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The Certificate That Lowers the Number Runs on a Taxpayer ID
Withholding is not the tax. It is a deposit against the tax, and when the deposit is larger than the liability the difference comes back on a US return the following year. For a seller whose gain is small relative to the price, that is a long time to leave money with the government.
Form 8288-B is the usual route to shorten it. The IRS can issue a withholding certificate that reduces or eliminates the withholding, and one of the grounds is precisely the gap between the withholding and the actual tax: that the amount required to be withheld would be more than the seller's maximum tax liability. The buyer, the buyer's agent, or the seller may request it.
Two mechanics decide whether the application is any use to you. The first is timing. Section 1445(c)(3)(B) requires the IRS to act on a request within 90 days of receiving it, and the IRS describes the same window as running from receipt of a complete application. The second is identification. The IRS states it acts within 90 days after receiving a complete application including the taxpayer identification numbers of all the parties to the transaction, which is the requirement a first-time filer is least likely to already satisfy.
An ITIN, the individual taxpayer identification number, is not something that arrives in a week. If you are holding US property through an LLC and have never filed a US return, the identification number is what sets the whole timeline, and starting it in the same month as the closing is what turns a reducible withholding into a full one.
There is also a notice obligation that is easy to miss. The IRS states that a seller who applies for a withholding certificate must notify the buyer in writing that the certificate has been applied for, on the day of the transfer or the day before it.
Where the identification number question usually lands
The certificate application needs numbers for every party, and a non-resident individual who has never filed in the US does not have one. Our guide to getting an ITIN as a non-resident LLC owner walks through the application itself, including the certified copy requirement that a first attempt often misses.
What the Buyer Files, and the Clock They Are On
FIRPTA puts the obligation on the buyer, not the seller. The IRS is direct about the consequence: if the seller is a foreign person and the buyer fails to withhold, the buyer may be held liable for the tax. That single sentence explains why closing agents treat the affidavit as a gating document rather than paperwork.
The buyer reports and pays the withheld amount on Forms 8288 and 8288-A, and the instructions to Form 8288 put both on one clock: the buyer must file the form and transmit the tax withheld by the 20th day after the date of transfer. Where a nonrecognition provision or a treaty position removes the gain instead, the seller gives the buyer written notice meeting the five requirements of 26 CFR 1.1445-2(d)(2)(iii), and the buyer files a copy of that notice by the same 20th day.
The IRS states that FIRPTA documents are processed at the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409. One case does not go there. A seller who does not yet have a taxpayer identification number files Form 8288-B attached to a Form W-7, and that package follows the W-7 instructions to the IRS ITIN Operation in Austin instead. Sellers who have moved between countries during a sale should treat the address on these filings as a live decision rather than a default, because correspondence about the certificate and any refund follows the addresses on the paperwork.
None of this is unusual for a foreign seller, and none of it is a reason to avoid holding US property through a US entity. It is a reason to know, before the contract is signed, which of the three rates applies to the transaction and whether the number on the closing statement can still be moved.
Frequently Asked Questions
Sources & References
Primary sources this guide is based on.
- 1Internal Revenue Service · Withholding of tax on dispositions of United States real property interests (FIRPTA) (accessed August 9, 2026)
- 2Internal Revenue Service · Exceptions from FIRPTA withholding (accessed August 9, 2026)
- 3Internal Revenue Service · Withholding certificates related to U.S. real property interests (accessed August 9, 2026)
- 4U.S. Government Publishing Office · 26 U.S.C. 1445, withholding of tax on dispositions of United States real property interests (accessed August 9, 2026)
- 5Electronic Code of Federal Regulations (National Archives) · 26 CFR 1.1445-2, situations in which withholding is not required under section 1445(a) (accessed August 9, 2026)
- 6Internal Revenue Service · Instructions for Form 8288 (Rev. January 2026) (accessed August 9, 2026)
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