FIRPTA Withholding and ITIN Financing for the Foreign Buyer, 2026

A foreign national buying property in the United States in 2026 runs into two separate sources of friction that get talked about as if they were one problem. The first is FIRPTA — the Foreign Investment in Real Property Tax Act — a withholding regime that attaches to the sale of US real estate by a foreign person, not the purchase of it. The second is financing: a buyer without a Social Security number typically needs an Individual Taxpayer Identification Number, or ITIN, to get a mortgage at all, and that routes the loan into a market priced differently from the rate table at a conventional bank. Both matter to the same buyer, just on different timelines. FIRPTA governs the exit, often years before the exit happens, and it becomes the buyer's immediate legal problem only in one specific case: if the seller on that same transaction is also a foreign person, the tax code makes the buyer the withholding agent, with personal liability for getting it wrong. Financing is the buyer's problem now, at underwriting, and it shapes both the down payment required and what the loan actually costs.

Under Internal Revenue Code Section 1445, the standard FIRPTA withholding rate on the disposition of a US real property interest by a foreign person is 15 percent of the amount realized — the gross sale price, not the seller's gain — per the IRS's FIRPTA withholding guidance, current as of its July 2026 update. That rate steps down in one case that covers most individual transactions: the IRS's Form 8288 instructions (revised January 2026) set a reduced 10 percent withholding rate where the property is acquired by the transferee for use as a residence and the amount realized is $1 million or less, and no withholding at all is required where one or more individuals acquire the property for use as a residence and the amount realized is $300,000 or less. Above $1 million, or where the buyer isn't acquiring the property for residential use, the full 15 percent applies to the entire sale price. The withholding agent — usually the buyer or the closing agent acting for the buyer — must file Form 8288 and remit the withheld amount to the IRS by the 20th day after the date of transfer, and the instructions are explicit that penalties apply under Section 6651 for filing or paying late. Because withholding is calculated on the sale price rather than the actual gain, a seller who owes little capital gains tax can still have 10 to 15 percent of the full transaction value held by the IRS until a return is filed and a refund processed.

The IRS lists ten circumstances in which FIRPTA withholding isn't required. The one most individual buyers will actually use is the residence-price exception above. Beyond that, per the IRS's exceptions guidance, withholding also doesn't apply where the seller certifies in writing that they are not a foreign person, where the amount realized on the transfer is zero, where a domestic corporation certifies the interest transferred isn't a US real property interest, where the transfer qualifies for nonrecognition treatment under the tax code or an applicable treaty, or where the IRS has already issued a withholding certificate reducing or eliminating the withholding based on the transferor's calculated tax liability on the sale. That last route is the one a seller with real gain exposure should be pursuing before closing, not treating as a form to fill out at the closing table — it requires an advance application to the IRS, and the certificate has to exist by the time of transfer to change what gets withheld.

It's worth being direct about the part of this that causes confusion: FIRPTA is not triggered by the act of buying. A foreign national purchasing US property owes nothing under FIRPTA at that closing, full stop. What can change at the moment of purchase is the buyer's status as a withholding agent, if the counterparty selling to them is also foreign. And what should change at the moment of purchase is the buyer's planning, because the price paid and the intended use — residence versus investment — are exactly the facts that will determine, on the eventual sale, whether that transaction withholds nothing, 10 percent, or 15 percent of the full price while the real tax liability gets sorted out afterward. A buyer who documents intended use and keeps the acquisition price in view of the $300,000 and $1 million thresholds is making a decision with consequences years out, not filling out paperwork.

An ITIN is a nine-digit number the IRS issues for federal tax filing purposes to people who aren't eligible for a Social Security number. The IRS is explicit that it does not confer immigration status, does not authorize work in the United States, and does not serve as identification outside the federal tax system. Fannie Mae's Selling Guide states that it requires each borrower to have a valid Social Security number or ITIN, which nominally keeps agency-eligible financing on the table — but the ITIN mortgage market that actually exists in practice runs through non-QM and portfolio lenders operating their own guidelines, not conventional agency-priced loans. Deephaven Mortgage's published wholesale ITIN program, as one concrete example, lends up to $1.5 million at a maximum 80 percent loan-to-value, meaning a 20 percent minimum down payment, with a 680 minimum credit score, debt-to-income ratios up to 50 percent, and income documented through bank statements or a profit-and-loss statement rather than tax returns, on primary residences, second homes, and investment properties, including non-warrantable condos. Other ITIN-focused originators publish looser terms: one non-prime lender's published guidelines put the typical ITIN down payment around 15 percent, set a minimum credit score of 600, and quote a rate premium of roughly 1 to 3 percentage points above conventional pricing, commonly landing near 2 points.

There is no single, honest answer to what an ITIN mortgage will cost, and a wide answer is more useful than a false precise one: the spread between a 680-FICO, 20-percent-down program and a 600-FICO, 15-percent-down alternative-credit program is large enough that two lenders quoting the same borrower can land more than a point apart on rate and several points apart on required down payment, because ITIN lending sits entirely outside Fannie Mae's and Freddie Mac's standardized pricing grids and every originator sets its own risk matrix. That is the actual shape of this market, not a gap in the research. For a foreign national buying US property in 2026, the sequence that follows from all of this is: get financing terms from at least two or three ITIN-specific originators before making an offer, since the down payment and rate differences between programs are wide enough to change the deal's cash-on-cash math on their own, and treat a pre-approval from a lender that doesn't actually run an ITIN program as no pre-approval at all. Confirm before closing whether the counterparty on the sale is a foreign person, because if so the withholding-agent obligations and the 20-day Form 8288 deadline become the buyer's personal responsibility, not a line item the closing agent quietly handles. And document the intended use and the price paid from day one, because those two facts, not anything decided at the time of sale, are what will determine years later whether the exit gets taxed on the way out at 0, 10, or 15 percent of the full sale price.