FIRPTA explained: taxes for foreign NY sellers

Full transcript

0:12 Hi, I’m Max Dilendorf — a New York attorney helping foreign buyers navigate the Manhattan market. Today, we’re breaking down a big one: FIRPTA—what it is, why it matters, and how planning can help you avoid it entirely.

0:29 FIRPTA stands for the Foreign Investment in Real Property Tax Act.

0:34 It’s a federal law that applies when non-U.S. residents sell real estate in the U.S.—like a condo in Manhattan. Here’s why this matters: When you sell your property, the buyer—not you—is required to withhold 15% of the total sale price and send it directly to the IRS. That’s not 15% of your profit—it’s 15% of the full sale price, no matter how much you actually earned. It would apply even if you generated loss from the sale of property. And that’s not all. In New York, there’s also a 10.9% state tax withholding on your gain, due at closing when you file Form IT-2663.

1:23 Let me give you a quick example: Let’s say you’re a foreign investor selling your Manhattan condo in 2025 for $5 million. You originally bought it for $1 million—so your gain is $4 million. Under FIRPTA, the buyer must withhold 15% of the $5 million sale price—that’s $750,000—and send it to the IRS.

1:51 Then, on top of that, you’re required to pay 10.9% of your $4 million gain, or $436,000, to New York State at closing. That’s over $1.1 million tied up, most of it immediately. Now yes—you can apply for a refund from the IRS if that $750,000 is more than the actual capital gains tax you owe.

2:20 But you’ll be waiting until you file your 2025 tax return in 2026. Meanwhile, that money is frozen.

2:30 Here’s the good news: FIRPTA is avoidable—with the right planning.

2:34 If you structure your purchase correctly from the start and your purchasing entity is not considered a “foreign person” under FIRPTA rules—you can avoid this withholding entirely.

2:47 In some cases, you may also avoid New York’s state withholding—especially if you’re eligible under one of the U.S. tax treaties with 60+ countries.

3:00 But you need to plan ahead. Ideally, two months before signing a contract.

3:05 Once the property is held in your personal name or in a U.S. LLC, changing that structure is expensive, complex, and often too late. Here’s the takeaway: FIRPTA can tie up hundreds of thousands—but it doesn’t have to.

3:25 Work with advisers who understand both real estate transactions and international tax planning.

3:31 Thanks for watching. If you found this helpful, subscribe to the channel and the next episode, we’ll discuss how to buy New York real estate using American or offshore trust structures.

A transcript of the recording, so it reads as speech rather than as prose. It explains the law in general terms and is not advice on your own situation, which turns on facts this video cannot know.