MANHATTAN, NY – September 02, 2026 – Foreign sellers of United States real estate face a federal withholding requirement that often surprises international investors at the closing table. New York foreign investment attorney Natalia A. Sishodia of Sishodia PLLC (https://sishodia.com/what-is-firpta-foreign-investment-in-real-property-tax-act/) is explaining how the Foreign Investment in Real Property Tax Act, commonly known as FIRPTA, applies to Manhattan real estate transactions involving a foreign seller.

According to New York foreign investment attorney Natalia A. Sishodia, FIRPTA generally requires a buyer to withhold a portion of the sale price when purchasing property from a foreign seller, unless a reduced rate or exemption applies. A foreign person under the statute includes nonresident aliens, foreign corporations, foreign partnerships, and foreign trusts or estates, and the distinction between citizenship and tax residency matters when determining whether the rule applies. “The buyer is the designated withholding agent under federal law. If a buyer fails to withhold, they can become personally liable for the full unpaid tax, plus interest and penalties,” Sishodia explains.

New York foreign investment attorney Natalia A. Sishodia notes that the withholding rate depends on both the sale price and the buyer’s intended use of the property. Sales under $300,000 may qualify for no withholding if the buyer certifies the property will be used as a personal residence, sales between $300,000 and $1 million may qualify for a reduced 10 percent rate under similar conditions, and transactions over $1 million are subject to the full 15 percent withholding rate regardless of the buyer’s intended use, a threshold many Manhattan sales exceed.

Attorney Sishodia adds that sellers are not without options when the standard withholding would significantly exceed their actual tax liability. “A foreign seller can apply for a withholding certificate through IRS Form 8288-B if their actual tax liability is lower than the standard withholding rate,” she notes, adding that filing the application before closing, with supporting documents like the purchase agreement and settlement statement, can significantly reduce the funds tied up during the transaction.

The firm points out that New York imposes its own estimated tax withholding on top of federal FIRPTA requirements, using Form IT-2663 for traditional real property sales such as condominiums and Form IT-2664 for cooperative units, both of which nonresident sellers must file and pay alongside the recording of the conveyance documents, separate from federal obligations.

Sishodia PLLC represents foreign buyers and sellers throughout Manhattan and the greater New York City area, coordinating FIRPTA compliance, withholding certificate applications, and New York State filings during residential and commercial closings involving international parties.

“Buyers who fail to withhold face liability for the full unpaid tax, plus interest and penalties. The IRS does not accept ignorance of the requirement as an excuse, which is why early legal guidance matters on both sides of the transaction,” advises Sishodia.

The firm also notes that a foreign seller may use a like-kind exchange to defer capital gains, though FIRPTA withholding is not automatically waived in that scenario and still requires a properly filed withholding certificate application coordinated with a qualified intermediary. Coordinating a like-kind exchange with FIRPTA compliance requires careful timing, since the replacement property must generally be identified within 45 days and the exchange completed within 180 days of the original transfer.

Attorney Sishodia notes that FIRPTA applies to a broad range of transactions beyond a standard sale, including installment sales, foreclosures, exchanges, and certain distributions of U.S. real property interests to foreign shareholders or partners. Buyers who fail to withhold under IRC Section 1445 face personal liability for the unpaid withholding amount, and penalties can include interest, a late-filing penalty of up to 25 percent of the unpaid tax, and an accuracy-related penalty in cases of negligence.

FIRPTA compliance can affect both timing and available proceeds in a New York closing involving a foreign party, and buyers and sellers navigating a transaction with FIRPTA implications are encouraged to consult an attorney early in the process.

About Sishodia PLLC:

Sishodia PLLC is a Manhattan-based law firm focused on real estate law, business law, elder law, estate planning, and taxation. Led by attorney Natalia A. Sishodia, the firm represents domestic and international clients in real estate transactions throughout Manhattan and the greater New York City area. For consultations, call (833) 616-4646.

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Company Name: Sishodia PLLC
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Phone: (833) 616-4646
Address:600 3rd Ave 2nd floor
City: New York
State: New York 10016
Country: United States
Website: https://sishodia.com/