Foreign buyer overview.

The Foreign Investment in Real Property Tax Act (FIRPTA, 26 USC §1445) requires withholding of US tax at the time of sale of US real property interests by foreign persons. This is the single most important federal rule for foreign buyers — and it’s the rule that’s most often misunderstood.

The basic withholding

When a foreign person (non-resident alien individual, foreign corporation, foreign trust) sells US real estate, the buyer is required to withhold a portion of the purchase price and remit it to the IRS. The standard withholding rate:

• 15% of the amount realized on the sale — typically the gross sale price, NOT the gain. For a $10M sale, the buyer withholds $1.5M.
• 10% reduced withholding applies in limited circumstances (most commonly, if the buyer certifies they will use the property as a personal residence and the price is between $300K and $1M)

The amount realized vs. the gain

Critical distinction: FIRPTA withholds based on the SALE PRICE, not the seller’s ACTUAL TAX LIABILITY. A foreign seller selling for $10M after $9M of basis owes ~$238K in federal capital gains tax — but $1.5M gets withheld upfront. The excess $1.26M is refundable, but only after filing a US tax return and waiting for the refund processing (often 6-18 months).

The exemptions

• FIRPTA certificate / non-foreign affidavit: If the seller is genuinely a US person, they sign a non-foreign affidavit and FIRPTA doesn’t apply
• Personal residence exemption: Buyer will use as personal residence + price ≤ $300K = no withholding; price $300K-$1M with personal residence = reduced 10% withholding
• Qualified Foreign Pension Fund exemption (less common for HNW transactions)

The qualified intermediary (QI) workaround

A common practical structure: the foreign seller files IRS Form 8288-B in advance of closing requesting a reduced withholding certificate based on the actual expected gain. If approved, the buyer withholds only the estimated tax (or less), not 15% of the sale price. Properly structured, this can reduce the withholding to the actual tax owed.

The 8288-B process takes 30-90 days. For foreign HNW sellers planning a US sale, engaging tax counsel 60-120 days ahead of closing to file the 8288-B is the standard playbook.

The choice of holding structure (individual ownership, US LLC, foreign LLC, trust, foreign corporation) affects FIRPTA withholding, federal estate tax exposure, income tax reporting, and privacy. The right structure depends on the foreign buyer’s home jurisdiction, the intended use of the property, and broader estate planning.

Individual ownership

The simplest structure. The foreign buyer takes title individually.

• Pros: Simplest; lowest setup cost; cleanest FIRPTA mechanics on sale
• Cons: Maximum estate tax exposure (US estate tax on US-situs assets, only $60K exemption for non-resident aliens vs $13.6M+ for US citizens); potential privacy concerns; no liability shielding

US LLC (single-member)

The foreign buyer forms a Delaware (or similar) LLC and the LLC takes title.

• Pros: Liability shield; some privacy; US LLC may simplify US banking; flexible for future restructuring
• Cons: Single-member LLCs are disregarded for US tax purposes, so the foreign individual is treated as direct owner — same estate tax exposure as individual ownership

US LLC (multi-tier with foreign parent)

A foreign holding company (typically established in a jurisdiction with US estate tax treaty benefits — like Cayman, BVI, or certain treaty countries) owns the US LLC, which owns the property.

• Pros: Mitigated estate tax exposure (foreign holding company isn’t US-situs); enhanced privacy
• Cons: Higher setup and ongoing costs (foreign entity maintenance); complex US tax reporting (Form 5472, etc.); FinCEN beneficial ownership reporting

Foreign corporation directly owning US property

A foreign corporation takes title to the US property.

• Pros: Strongest estate tax mitigation; foreign corporation isn’t a US-situs asset for the individual’s estate
• Cons: Punitive US income tax treatment — the foreign corporation pays US corporate tax on rental income and gain at higher rates; branch profits tax exposure

Trust structures

Foreign grantor trusts and non-grantor trusts can hold US real estate with different tax implications. Generally:

• Foreign grantor trust: treated as direct owner of the grantor; estate tax exposure follows the grantor
• Non-grantor trust: independent tax entity; subject to US income tax on US-source income; complex for HNW planning

The decision framework

For most HNW foreign buyers acquiring US luxury real estate as a primary or secondary residence, the multi- tier structure (foreign holding company → US LLC → property) is the standard recommendation, optimizing for:

• Federal estate tax mitigation
• Liability protection
• Privacy
• Flexibility for future restructuring

The setup typically runs $25K-$75K depending on complexity, and the structure requires engagement of international tax counsel familiar with both the foreign jurisdiction and US tax mechanics.

The single most consequential federal tax issue for foreign HNW buyers of US real estate is the federal estate tax exposure. The rules are dramatically different for non-resident aliens compared to US citizens.

The basic rule

• US citizens / domiciliaries: Federal estate tax exemption of $13.61M (2024) / $13.99M (2025) / projected $14.06M (2026). Estates below the exemption pay $0 federal estate tax. Estates above pay up to 40% of the excess.
• Non-resident aliens (non-domiciled foreign buyers): Federal estate tax exemption of only $60,000. Estates of US-situs assets above $60K pay up to 40% on the excess.

The implication: a foreign HNW buyer who owns a $10M Manhattan condo individually has $9.94M of federal estate tax exposure (potentially ~$3.97M in tax at 40%) if they die owning the property. A US citizen with the same property would have $0 federal estate tax exposure (assuming they have other assets below the much higher exemption).

Treaty benefits

Several US estate tax treaties provide enhanced exemptions for residents of specific jurisdictions. Notable treaty countries:

• Canada, Mexico, UK, France, Germany, Japan
• Italy, Switzerland, Netherlands, Greece
• Australia, Denmark, Finland, Norway, Sweden
• South Africa

For residents of treaty countries, the treaty often provides a much larger effective exemption (sometimes prorated based on US-situs assets as a portion of worldwide assets). For residents of non-treaty countries, the $60K exemption applies harshly.

The structuring opportunity

The multi-tier holding structure (foreign holding company → US LLC → property) removes the property from the individual’s US-situs asset list. The foreign holding company is not a US-situs asset; the individual owns the foreign holding company, not the US property.

For HNW foreign buyers, this single planning move can save 40% × (asset value − $60K) in federal estate tax — meaningful structural protection at the trophy tier.

In 2024-2026, the US Financial Crimes Enforcement Network (FinCEN) expanded beneficial ownership reporting requirements. Foreign HNW buyers using LLC structures face specific reporting obligations.

Geographic Targeting Orders (GTO)

FinCEN GTO requirements apply to all-cash residential purchases by LLC or other entities above specific thresholds in designated metropolitan areas. The thresholds and rules update periodically. As of 2026:

• Applies to all-cash purchases (no financing) by entities
• Specific metropolitan areas including NYC, Miami, LA (and others) with varying price thresholds
• Requires disclosure of beneficial owner identity to the title insurance company, which reports to FinCEN

Corporate Transparency Act (CTA)

Separate from GTO, the CTA requires LLC entities formed in the US to report beneficial ownership to FinCEN. Initial reporting deadlines from January 2024; ongoing annual updates. Foreign-owned US LLCs are subject to this requirement.

The compliance posture

For foreign HNW buyers using LLC structures, FinCEN compliance is now part of the standard transaction workflow. Engage tax counsel + international tax compliance support that handles these filings routinely. The compliance cost is real but manageable.

For foreign buyers acquiring NYC luxury real estate, the federal FIRPTA + estate tax + entity framework above applies. The NYC-specific overlay:

Pied-à-terre tax exposure

The 2026 NYC pied-à-terre tax applies to non-primary- residence properties above value thresholds. Foreign buyers are particularly exposed because they generally can’t claim NYC primary residence (no NYS resident return) — meaning the only available exemption is full-time rental to an NYC primary resident.

Read the full pied-à-terre tax pillar →

Co-op board approval challenges

Most NYC co-ops have substantive board approval processes. International buyer comfort varies by building — newer condominiums and Billionaires’ Row trophy buildings welcome international buyers; older pre-war co-ops on Park / Fifth / CPW often impose substantial requirements.

Resources

The Foreign Buyer Manhattan guide covers NYC-specific dynamics in depth — board approval, specific building cultures, and the Manhattan transactional framework.

Florida is the most welcoming HNW US market for foreign buyers structurally. The reasons:

• No state income tax. Foreign owners don’t face state-level income tax on rental income or capital gains
• No state estate tax. The federal estate tax is the only state-or-federal estate tax exposure
• Friendlier condo board posture. FL condominium boards generally accept international buyers more readily than NYC co-op boards
• Latam business and financial infrastructure in Miami specifically (banking, legal, accounting, wealth management)

Save Our Homes for FL residents

The 3% Save Our Homes assessment cap applies only to FL homestead-elected primary residence — meaning foreign buyers using FL property as primary residence (with full residency move) can capture this benefit. For foreign buyers maintaining their home country as primary residence, the SOH cap doesn’t apply.

Read the Save Our Homes pillar →

Miami post-Surfside considerations

Foreign buyers of older Miami condo inventory should specifically review the post-Surfside regulatory regime (milestone inspections, SIRS, reserve waiver elimination). The diligence framework applies regardless of international buyer status.

Miami post-Surfside diligence →

For foreign buyers acquiring LA luxury real estate, the federal framework above applies. LA-specific overlays:

California state income tax

CA aggressively taxes rental income and capital gains on CA property regardless of owner residency. For foreign buyers planning to rent the property or eventually sell, CA state tax at 13.3% top bracket applies on the CA-source income.

Property tax (Prop 13)

Foreign buyers benefit from Prop 13’s annual assessment cap (2% maximum increase per year), same as US citizen buyers. The Prop 13 benefit accrues to the owner regardless of residency.

Measure ULA exposure on eventual sale

For trophy foreign buyers planning eventual sale, the Measure ULA exposure ($5.3M / $10.6M cliffs in City of LA) is material. The exemption structure doesn’t provide foreign-buyer-specific carve-outs.

Measure ULA strategy →

Latin American + Asian buyer infrastructure

LA (particularly Beverly Hills, Bel-Air, and the Westside) has substantial international buyer infrastructure — banking, legal, and brokerage services oriented toward specific international markets. For Asian buyers, international brokerage firms with established Hong Kong / Singapore / Beijing presence often facilitate transactions.

Aspen has a substantial international buyer presence, particularly from Europe, the Middle East, and Latin America. The federal framework applies; Aspen-specific overlays:

Colorado state tax

CO has a flat 4.4% state income tax (post-Prop 121, 2022). Foreign buyers face CO state tax on rental income and capital gains on CO property. Materially lighter than CA (13.3%) or NY (10.9%), but more than FL (0%) or WY (0%).

Property tax

CO property tax rates are among the lowest in the US, and Pitkin County assessments tend to be moderate. Foreign buyer carrying cost is favorable on a property- tax basis.

HOA / RETA considerations

For foreign buyers acquiring base-area condo inventory, the HOA / RETA wild card (1-2% buyer-paid private transfer fee at many Aspen-area PUDs) applies the same as for US buyers.

Aspen HOA / RETA →

The Manhattan-Aspen split-residence pattern

For foreign HNW buyers maintaining both NYC and Aspen properties, the pied-à-terre tax (NYC) + the cross- state structuring conversation are part of the broader planning.