FIRPTA when a former green-card holder sells US property

Many US retirees who settle in Spain eventually let go of their US immigration status: a green-card holder files Form I-407 to abandon the card, or a citizen renounces. From that moment they are foreign persons for US tax. If a US home or rental is still sitting on the books, the sale that felt routine while they were a US person now runs into a rule most people have never heard of: FIRPTA, the Foreign Investment in Real Property Tax Act.

FIRPTA turns the buyer of your property into a tax collector. When a foreign person sells US real estate, the buyer is generally required to withhold 15% of the gross sales price and send it to the IRS. Not 15% of your profit, 15% of the whole price. On a modest gain that can be far more tax than you actually owe, and the money is locked up until you file a US return to claim it back.

This page is for the retiree in Spain who has already given up, or is about to give up, US status and still owns US real property. It explains exactly when FIRPTA bites, how the withholding is calculated, how a withholding certificate can reduce it, why you still file a US return afterwards, and how Spain taxes the same gain. It is a different situation from selling a US home while you are still a US person, where FIRPTA does not apply at all.

"The surprise is always the same: a client hands back the green card, feels lighter about US paperwork, and then goes to sell the old family home. Suddenly the closing agent is holding back a six-figure sum for a tax bill that turns out to be a fraction of it. None of it is avoidable by ignoring it, but almost all of it is manageable if you plan the sale before you file the I-407, not after."

The short answer

FIRPTA is a US withholding rule aimed at foreign owners of US real estate. If you are a foreign person, a nonresident alien for US tax, and you sell a "US real property interest," the buyer must generally withhold 15% of the amount realised (in most straightforward sales, the gross price) and remit it to the IRS using Forms 8288 and 8288-A. The withheld amount is a credit against your actual US tax, not the tax itself.

Two facts drive everything that follows. First, FIRPTA is triggered by your status, not your address: it applies only once you have stopped being a US person, so a green-card holder who still holds the card is not caught. Second, because the 15% is measured against the price rather than the gain, it very often overshoots the real tax, which is why the withholding certificate and the later return matter so much.

When FIRPTA actually applies to you

The whole rule turns on a single line: are you a US person or a foreign person on the day of the sale? A US citizen and a lawful permanent resident (green-card holder) are both US persons for tax, and US persons are outside FIRPTA. Sell your home while you still hold a valid green card and it is an ordinary US-person sale, reported on your US return with no FIRPTA withholding, whatever your Spanish address says.

The change happens when your US status formally ends. A green-card holder abandons the card by filing Form I-407, or lets it be administratively or judicially revoked; a citizen renounces. From that date you are a nonresident alien, a foreign person, and any later sale of US real estate falls squarely inside FIRPTA. This is the same status line that decides whether renouncing citizenship in Spain makes sense and whether the separate US exit tax on covered expatriates applies. FIRPTA is not the exit tax; it is a distinct withholding regime that can apply years after you expatriate, whenever you finally sell.

It is worth being precise about who is affected. Retirees who never held US status, non-US citizens who simply moved to Spain, were foreign persons all along and follow the ordinary FIRPTA path if they own US property; their non-lucrative visa position as green-card holders or non-US citizens is a separate immigration question. The group that gets ambushed is the one that used to be inside the US system and forgets that the exit changed the rules for their real estate.

How the 15% withholding works

The mechanics sit with the buyer. On a sale by a foreign person, the buyer (the "transferee") is legally responsible for withholding the FIRPTA amount, remitting it to the IRS within a short window after closing on Form 8288 with a Form 8288-A for each foreign seller, and giving you a stamped copy of the 8288-A that evidences the credit. In practice the closing or title company handles the paperwork, but the liability is the buyer's, which is why buyers and their agents insist on getting FIRPTA right.

The standard rate is 15% of the amount realised. For a normal cash-or-mortgage sale that is essentially the gross sales price, before your mortgage payoff, agent commissions or costs. Because it ignores your basis, the withholding bears no relationship to your gain. Sell a long-held home for US$600,000 that you bought for US$550,000 and the true federal tax on a US$50,000 gain is modest, yet the default FIRPTA withholding is US$90,000. That gap, tax withheld minus tax owed, is what you spend the following year recovering.

There are built-in reductions that depend on the buyer's use and the price. If the buyer acquires the property to use as a residence and the price is US$300,000 or less, withholding can be zero; between US$300,001 and US$1,000,000 with the same residence use, the rate can drop to 10%; above that, or without the residence use, the full 15% applies. These exemptions turn on the buyer's intentions, not yours, so they cannot be assumed, they have to be documented at closing.

Reducing it with a Form 8288-B certificate

You do not have to accept a withholding that dwarfs your real tax. Before or at the time of the sale, a foreign seller can apply to the IRS for a withholding certificate on Form 8288-B, showing that the tax on the sale will be less than the 15% otherwise withheld, typically because the gain is small relative to the price. If the IRS issues the certificate, the buyer withholds the reduced amount the certificate specifies rather than the full 15%.

Timing is the catch. The application should be filed by the date of the transfer, and the IRS takes time to process it, often several weeks or more. If the certificate is still pending at closing, the standard practice is that the buyer withholds the full amount but holds it in escrow rather than remitting it immediately, pending the IRS decision. To make the certificate work you have to start it early, well before the closing date, with your basis, purchase documents and a computed gain ready. Left to the last minute, the money simply goes to the IRS and you wait for it through the return instead.

A withholding certificate is also where a clean record of your cost basis earns its keep. Old purchase papers, records of capital improvements, and, where relevant, any basis step-up on the death of a spouse, all reduce the gain the certificate is built on. The related question of a community-property basis step-up for US retirees can materially change the number the IRS certifies.

Filing Form 1040-NR to reconcile

FIRPTA withholding is a prepayment of tax, never the final tax. Whatever is withheld at closing, you still report the actual sale and compute the real gain on a US nonresident return, Form 1040-NR, for the year of the sale. The gain on US real property is income effectively connected with a US trade or business for a foreign person, so it is taxed on the 1040-NR at graduated rates, and the FIRPTA amount shown on your stamped Form 8288-A is credited against that tax. If, as usual, the withholding exceeded the tax, the difference comes back as a refund.

The practical reality is a wait. You cannot claim the refund until you file the return for the year of sale, which means the over-withheld cash can sit with the IRS for many months after closing. This is the step people skip at their peril: without the 1040-NR there is no mechanism to recover the excess, and the FIRPTA money is simply lost. If you kept any US filing footprint after expatriating, the return also has to sit sensibly alongside the broader Form 1040-NR rules after giving up US status.

Does the home-sale exclusion still help?

The familiar US principal-residence exclusion, which can shelter up to US$250,000 of gain (US$500,000 for a couple) on a main home, is not automatically switched off because you are now a foreign person: it depends on meeting the ownership-and-use tests, generally living in the home as your main residence for two of the last five years. A retiree who moved to Spain some years ago and rented the home out, or left it empty, may well fail the use test by the time they sell, in which case none of the gain is sheltered. Renting first has its own consequences, explored in renting your US home after becoming a Spanish resident.

Even where the exclusion still applies to the gain, it does not remove the FIRPTA withholding at closing. The exclusion reduces the tax on your return; the buyer still has to withhold on the price unless a withholding certificate or a buyer-residence exemption lowers it. So the exclusion and FIRPTA operate on different layers: one shrinks the final tax, the other governs the cash held back up front. Planning the sale around both, ideally while the two-of-five-years use test can still be met, is where the timing pays off.

The Spanish side: worldwide gain and the treaty

Selling US property does not only concern the IRS. If you are a Spanish tax resident in the year of the sale, Spain taxes your worldwide capital gains, so the gain on the US home is reported in Spain, generally in the savings tax base at the progressive savings rates. The mechanics mirror how capital gains on property are taxed in Spain, but applied to a foreign asset.

Double taxation is relieved through the US-Spain tax treaty and foreign tax credits, so you are not meant to pay full tax twice on the same gain. Two points catch people out. First, the Spanish over-65 exemption for reinvested proceeds applies to your Spanish habitual residence, not to a US property you no longer live in, so do not assume a familiar Spanish relief covers a US sale. Second, Spain computes the gain in euros using its own basis and exchange-rate rules, which will not match the dollar figure on your 1040-NR; the two calculations can produce different gains even before any credit.

The cash-flow trap and planning the sale

The hardest part is rarely the tax rate; it is the timing. FIRPTA can lock up a large slice of your proceeds with the IRS from the day of closing, recoverable only through a 1040-NR filed for that year and processed months later. Spain, meanwhile, wants its tax on the same gain for the same fiscal year, on the Spanish calendar. So you can find yourself paying Spain while a big chunk of your own money is still sitting in the US withholding system waiting to come back, a genuine liquidity squeeze if the property was meant to fund your move or your proof of means from downsizing.

That is why the sharpest single decision is when to sell relative to when you give up US status. Selling while you are still a US person avoids FIRPTA entirely and may preserve a cleaner path to the home-sale exclusion; selling after you expatriate brings FIRPTA, the withholding certificate route and the 1040-NR into play. Neither is automatically better, a large gain, the exit-tax analysis, and the Spanish residence position all pull in different directions, but the choice should be deliberate. The expensive version of this is discovering FIRPTA at the closing table; the manageable version is mapping the sequence, and lining up basis records and a Form 8288-B application, well before either the sale or the I-407.

At a glance

Sources reviewed July 2026: IRC §897 and §1445 (FIRPTA, the taxation and withholding on dispositions of US real property interests by foreign persons); IRS FIRPTA withholding materials and the instructions to Form 8288 and Form 8288-A (buyer's withholding and reporting obligations, 15% standard rate, buyer-residence exemptions at the US$300,000 and US$1,000,000 price points); IRS instructions to Form 8288-B (application for a withholding certificate to reduce withholding to the expected tax); IRS guidance on Form 1040-NR and effectively connected income for nonresident aliens; IRC §121 (exclusion of gain on sale of a principal residence and the ownership-and-use tests); IRS guidance on abandonment of lawful permanent resident status (Form I-407), expatriation and covered expatriates; and, on the Spanish side, IRPF rules on worldwide capital gains in the savings base, the main-home over-65 and reinvestment reliefs, and the US-Spain double taxation treaty and foreign tax credit. Rates, thresholds, forms and procedures change, and individual facts vary widely. This is general information only, not legal, tax, financial or immigration advice, and no lawyer-client relationship is created. Confirm the treatment of any specific sale with a qualified US tax adviser and Spanish tax adviser before you act.