US Property Tax for Non-US Citizens (2026): FIRPTA, $60,000 Estate Tax & Rental Rules Explained

How Property Crosses Borders At Death

A London buyer wires funds to a New York title company. A Swiss family closes on a Miami vacation condo. A German engineer signs a Texas purchase contract before her work visa is stamped. In each case, the US tax regime under the transaction is not the one that applies to a US citizen, and it isn't the same at purchase, during ownership, on rental, on sale, or on death. This article explains the rules that apply to anon-resident alien (an NRA, not a US citizen, not a lawful permanent resident, not a US tax resident under the substantial-presence test) buying and holding US residential real property. It is an explainer, not a recommendation: structure decisions depend on facts an article can't see and belong with qualified US tax counsel.

Why the US Treats a Non-US Buyer Differently at Every Stage

The Internal Revenue Code draws a hard line between US and non-US persons. A US citizen is taxed on worldwide income and gets a federal estate tax exemption of $15 million per person under the One Big Beautiful Bill Act effective January 1, 2026. A non-resident alien is taxed by the US only on US-source income and US-situs assets, but the mechanics on those pieces look very different. Rental income faces 30% gross withholding unless an election is made. FIRPTA sits on every sale. And the estate tax exemption that shelters a citizen's $15 million estate shelters a non-resident's US-situs estate up to just $60,000, a figure OBBBA left untouched.

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During Ownership and Rental: Forms, Withholding, and the §871(d) Net Election

FormW-8BEN and the default 30% withholding

An NRA receiving US-source rental income gives the US payor a Form W-8BEN, identifying themselves as a non-US person and claiming any treaty position. By default, US-source rental income is taxed at a flat 30% on the gross rent, collected via withholding under §1441 and §881.There are no deductions allowed against the 30%, no mortgage interest, no property tax, no depreciation, no management fees. A property grossing $50,000a year and netting close to zero after expenses faces $15,000 of US tax on that default.

The§871(d) net-basis election

§871(d) lets an NRA elect to treat income from US real property as effectively connected with a US trade or business. The income moves onto Form 1040-NR on a net basis, deductions for mortgage interest, property tax, management, insurance, repairs, and depreciation(27.5-year straight-line for residential rental), and is taxed at regular graduated rates rather than 30% gross. The election is binding for future years until revoked with IRS consent. In what I see most often, this election is where the biggest practical difference between the gross and net regimes shows up.

On Sale: FIRPTA and Its Mechanics

15% default with holding on the gross sale price

FIRPTA, the Foreign Investment in Real Property Tax Act, enacted in 1980, exists so that a non-US person disposing of US real property doesn't leave the country without paying tax on the gain.§1445 of the Code requires the buyer (not the seller) to withhold 15% of the gross sale price and remit it to the IRS within 20 days of closing, on Forms8288 and 8288-A. Two points often surprise sellers. The withholding is on the gross price, not the gain. And the obligation sits on the buyer; if the buyer fails to withhold, the buyer is personally liable for it plus interest and penalties. Statutory reductions apply: buyer-occupied residences up to $300,000are exempt; between $300,000 and $1,000,000 the rate drops to 10%; above that,15% applies.

Reduction or refund via Form 8288-B

The 15% is a prepayment, not the final tax. The actual US tax on the gain is computed on Form 1040-NR for the year of sale, and the seller claims the FIRPTA withholding as a credit. If 15% of the gross price exceeds the tax on the actual gain, the difference comes back as are fund. A seller who would prefer the withholding be reduced at closing, rather than wait for a refund, applies for a withholding certificate on Form 8288-Bbefore closing. IRS review times for 8288-B applications have historically run to several months, so timing relative to closing matters.

State-level withholding

Several states operate their own withholding regimes on top of FIRPTA. California's Form 593 takes 3.33% of the gross sale price (or 12.3% of the gain, at the seller's election). New York'sIT-2663 applies the state's highest individual income tax rate to the estimated gain. Hawaii's HARPTA takes 7.25%. Maryland takes 8%. Florida and Texas have no state income tax and impose no equivalent withholding. These state regimes run on parallel forms and are independent of FIRPTA.

On Death and Gift: the NRA Estate Tax Position and Where Treaties Change the Answer

The $60,000 US-situs exemption

§2102(b) of the Code gives a non-resident alien decedent a unified credit equivalent to a US estate tax exemption of $60,000 on the US-situs portion of the estate. The comparable figure for a US citizen is $15 million under OBBBA, a 250-fold difference on what may be the same underlying property. OBBBA raised and made permanent the citizen exemption from January 1, 2026; it left the NRA $60,000 figure untouched. The top federal estate tax rate is 40% on the portion above the exemption.

What counts as US-situs

US real estate is plainly US-situs. So is a mortgage secured by US real property and held as a receivable by the decedent, stock of a US-incorporated entity (including, in most cases, a US LLC interest), and tangible personal property physically located in the US at death. Stock of a foreign corporation is not US-situs. For an NRA owning US residential real estate directly, the property is fully US-situs with no specific exemption.

How estate tax treaties modify the analysis

The United States has estate, inheritance, and gift tax treaties in force with around 15 jurisdictions, including the UK, Ireland, Switzerland, Germany, France, the Netherlands, Denmark, Sweden, Finland, Norway, Greece, Italy, Austria, Australia, Japan, and South Africa. Under the US-UK treaty, for example, a UK-domiciled decedent owning US real estate can claim a pro-rata unified credit, the US $15 million exemption multiplied by the ratio of US-situs assets to the worldwide estate, in place of the $60,000 default. Treaties don't help where there isn't one: a buyer resident in Saudi Arabia, the UAE, Singapore, or Brazil works with the $60,000figure unmodified.

Gift tax on US-situs real property

Lifetime gifts of US-situs real property by an NRA are subject to US gift tax. There is an annual exclusion ($19,000 per recipient in 2026, indexed) and an unlimited marital deduction only where the recipient spouse is a US citizen. NRAs do not get a lifetime unified credit against gift tax, a frequent surprise to non-US parents transferring US real estate to children during life.

Ownership Structures: What Each One Does at the US Tax Level

Four structures show up most often. Each produces a different result at US income tax, US estate tax, and state tax, and each carries a different administrative load. None is "the answer. "The appropriate choice depends on facts that sit outside an article, home-country tax, treaty position, family structure, holding period, investment scale, and belongs with qualified US tax counsel.

Direct personal ownership

Title in the buyer's own name. Form 1040-NR(with or without a §871(d) election). The property is fully US-situs and sitsagainst the $60,000 estate tax exemption or its treaty-modified equivalent. FIRPTA applies on sale. Non-resident state income tax and state withholding on sale apply. Administrative load is the lowest of the four.

USLLC (disregarded or partnership)

A single-member LLC owned by an NRA is by default disregarded for US income tax; a multi-member LLC is by default a partnership. Either way, income flows through to the owner. At estate tax, the IRS and the courts have generally treated an LLC interest holding US real property as itself US-situs, the LLC layer does not, on its own, shelter the owner from US estate tax exposure. A partnership form brings Form 1065, K-1s,and §1446 withholding obligations.

Foreign corporation

An NRA capitalizes a non-US corporation that then buys the US property. The owner holds stock of a foreign corporation, not US-situs, so the underlying property sits outside the owner's US estate. In exchange, the structure introduces US tax layers: 21% corporate tax on US effectively connected income (§882); a 30% branch profits tax under §884 on the dividend-equivalent amount (unless reduced by treaty); FIRPTA and 21% corporate tax on the gain when the corporation sells; 30% withholding on dividends to the NRA shareholder; and material administrative load, Form 1120-F, bookkeeping, registered agent, state corporate compliance. Whether the estate-tax benefit outweighs these offsetting layers for any individual buyer is a question for qualified US tax counsel.

Trust (foreign or US)

Trust structures, foreign grantor, foreign non-grantor, US domestic, can hold US real property. Income tax treatment depends on grantor vs non-grantor and foreign vs US status. At estate tax, the question is whether the decedent retained sufficient powers or interests for§2036, §2038, or §2041 to pull the assets back into the US estate. Administrative load is the highest of the four, including trustee fees, accounting, and Form 3520 / 3520-A filings for any US beneficiaries.

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What Each Structure Does at the US Tax Level, at a Glance

Illustrative comparison of the four most commonly considered ownership structures for an NRA acquiring US residential real property. The appropriate choice depends on individual facts and should be determined with qualified US tax counsel.

Source: Skybound 2026

Questions To Raise With A Qualified Adviser

For a non-US buyer of US residential property, a short list of questions to raise with US tax counsel and across-border financial planner includes:

• What is my home country's tax treatment of the same property and rental income, and how does the foreign tax credit on either side coordinate the result?
• Is there an estate tax treaty in force between my country of domicile and the United States, and how does it modify the $60,000 default?
• What state am I buying in, and does that state operate its own withholding regime on rental income or sale proceeds?
• If I am considering a structure(LLC, foreign corporation, trust), what does each one do at US income tax, US estate tax, my home-country tax, and at state level, and what is the all-in administrative cost?
• If I plan to leave the property to children or to a non-citizen spouse on my death, what does the US estate tax computation look like under each scenario?