You sold US property as a Canadian resident and a large piece of the price went to the IRS instead of to you. Here's what was actually withheld and on what base, what Form 8288-B changes, and how the excess comes back. Every rule below is quoted from the statute, the regulations or the IRS's own forms, and linked.
Section 1445(a) makes the buyer deduct and withhold 15% of the amount realized, and the amount realized is the gross figure. The regulation defines it as the cash paid, plus the value of any other property transferred, plus the outstanding amount of any liability the buyer assumes or takes the property subject to. Nothing comes off for what you paid for the place, what you spent fixing it up, the agent's commission, or the mortgage you're clearing at closing. Assumed debt gets added in, not deducted.
That's why the amount held back bears no fixed relationship to what you'll owe. The tax is a separate calculation entirely. Section 897 treats gain on a US real property interest as if you'd been running a US business, so it lands on the gain at graduated rates, and the withheld money is a deposit against whatever that turns out to be.
Sell at a loss and 15% of the gross price still comes out. The regulation says the duty to withhold isn't affected by how much cash the buyer hands over, and that withholding stops only where the amount realized is zero. Somebody who bought in 2021, sold into a softer market and walked away from the table with nothing still watches 15% of the gross price leave for the IRS.
As an illustration, with round hypothetical numbers: on a $900,000 sale of a place that cost $800,000, the withholding runs at 15% of the full $900,000 gross price while the gain is $100,000, so more money leaves the closing table than the seller made on the whole deal.
It applies for a withholding certificate. A certificate obtained before a transfer tells the buyer that no withholding is required, or that less than the statutory 15% of the gross amount realized is. A certificate obtained after a transfer can authorise a normal refund or an early one. Either side of the deal can apply for it.
The form covers three bases and no others: nonrecognition treatment or exemption from tax, a calculation showing the seller's maximum tax liability is less than the amount otherwise required to be withheld, or the special instalment sale rules in Rev. Proc. 2000-35. The middle one is the route this page is about.
Maximum tax liability is a defined computation, and it's a tax figure. For an individual it generally starts at the contract price minus the property's adjusted basis, multiplied by the maximum individual rate on long term capital gain. Then it's adjusted for five named things: any treaty reduction, the effect of any nonrecognition provision, losses already realized and recognized on other US real property dispositions that year, anything that has to be treated as ordinary income, and any other factor that moves the tax either way. The seller's unsatisfied withholding liability is added on top.
Canada runs the mirror problem on a different number. A non-resident selling Canadian property posts a payment on account of 25% of the gain under section 116(2), a flat share of one figure, while the US route here is a computed tax liability adjusted for those five factors, and the headline rates differ too, since Canada withholds 25% of the gross price and the US 15% of the gross amount realized. If you've got a sale on that side as well, here's how the Canadian clearance certificate works when a non-resident sells Canadian property.
If the US property was rented out, depreciation feeds the ordinary-income adjustment in that calculation, and the 8288-B instructions ask for depreciation schedules or a statement of why depreciation wasn't allowable. Running mirror-direction, for a Canadian property rented out by someone living in the US, we've covered how cross-border rental income is taxed and reported.
One thing a granted certificate doesn't do is settle your tax.
The application has to be submitted to the IRS on the day of, or at any time prior to, the date of transfer. Submitted means actually received by the IRS, or, under section 7502, the day it was put in the mail.
Here's the part almost every page on this topic gets wrong. A timely application does not switch the withholding off. The buyer still withholds the full statutory percentage of the gross amount realized. What moves is the date the money has to go to the IRS.
So a timely 8288-B keeps the money out of the IRS's hands. It doesn't keep it out of the withholding agent's. Whether the funds sit in escrow, and whether they're released to you when the certificate arrives, is a matter of the closing documents and the closing agent's own risk position. Settle that with the buyer and the closing agent in writing before you sign, because the regulation doesn't do it for you.
"Before closing" also isn't the test. Date of transfer is a defined term, and on some deals it lands earlier than the recorded closing.
If you're the one applying, which is the usual case for a Canadian seller, you have to give the buyer notice before the transfer. No form exists for it. The regulation wants your name, address and taxpayer identification number, a brief description of the property, and the date the application went in, and the Form 8288-B instructions add that the notice has to be in writing and given on the day of or prior to the transfer.
The IRS will deny an application that doesn't carry the identifying numbers of all the parties, not just yours. Most Canadian sellers have no US number at the point somebody first says the word FIRPTA to them, and the regulation says flatly that no certificate will be issued without the seller's identifying number. If you're eligible for an ITIN, the instructions let you attach the completed Form 8288-B to a Form W-7 and send the package together. How long that takes isn't published anywhere we could find, so we won't put a number on it.
The 90-day clock is the other reason the numbers matter. The IRS will act on an application no later than the 90th day after it's received, but for this purpose an application is received on the date all the information needed for a determination is provided. An incomplete application never starts the clock. On non-conforming security applications and in unusually complicated cases the IRS may not make 90 days, and it says so by the 45th day.
Miss the date of transfer and there's no cure period on the US side. That's a real difference from the Canadian regime, where a seller who did nothing before closing can still send CRA a notice within 10 days after the disposition, with a capped penalty attached, and it's set out in the 10-day notice Canada allows after a Canadian sale closes. Here the routes left are the tax return, or an early refund once a certificate issues after the fact.
| No application filed | 8288-B submitted on or before the date of transfer | 8288-B or refund claim filed after the transfer | |
|---|---|---|---|
| What the buyer withholds | 15% of the gross amount realized, or 10% of that same gross amount realized in the residence band set out below. | The same 15% of the gross amount realized, or 10% of that same gross amount realized in the residence band. A timely application doesn't switch the withholding off. | 15% of the gross amount realized already came out at the transfer, or 10% of that same gross amount realized in the residence band. |
| When the buyer sends it to the IRS | By the 20th day after the date of transfer, on Forms 8288 and 8288-A. | Not until the 20th day after the IRS mails its final determination, whether that's the certificate or a denial. | Already sent, by the 20th day after the date of transfer. |
| When you can get the excess | After the tax year of the sale ends, through the US return for that year. The IRS instructions say to allow up to 6 months for refunds reported on Form 8288-A. | If the IRS issues a certificate for less than the amount held back, that difference never reaches the IRS at all. | An early refund can be applied for once a certificate issues, before the return is due. It's paid without interest. |
| What you have to file | A US income tax return for the year of the sale, with the stamped copy of Form 8288-A attached. | Form 8288-B on or before the date of transfer, plus written notice to the buyer before the transfer if you're the applicant. | Form 8288-B, then either an early refund application with the stamped Form 8288-A attached, or the return. |
Three timing choices on one axis. Percentages in every cell are measured on the gross amount realized, which is the cash plus other property plus assumed liabilities, with nothing subtracted for basis, costs or payoffs. No cell here is a calculation of anyone's actual numbers.
Both statutory reliefs belong to the buyer, and both of their thresholds are gross tests measured on the amount realized.
The first one takes withholding to zero. It needs the property to be acquired by the buyer for use as a residence, and the amount realized, meaning the gross price, not to exceed $300,000. The regulation puts real content behind "for use as a residence": on the date of transfer the buyer needs definite plans to live there for at least 50% of the number of days the property is used by anyone during each of the first two 12-month periods after the transfer. The buyer also has to be an individual. Nothing is filed with the IRS to claim it, and if the buyer doesn't in fact live there for those days, the buyer is liable for the failure to withhold, where the seller was a foreign person and the US tax on the gain went unpaid. You can't make a buyer claim it, and if the buyer withholds anyway, the exception gives you nothing to point at.
Two owners don't get two thresholds. The $300,000 test is measured on the gross amount realized for the disposition, not on each seller's slice of it, and the IRS has answered that question directly.
The second relief is a rate band rather than an exemption. Where the buyer is acquiring the property for use as a residence, the amount realized doesn't exceed $1,000,000 gross, and the $300,000 exception doesn't apply, the statute substitutes 10% for 15%, still measured on the gross amount realized. That ceiling is a gross test as well, so a sale whose gross amount realized is above $1,000,000 sits outside the band however small the gain is. Neither threshold is indexed, and neither has moved.
Where a Canadian and a US person own the property together, the amount realized is split between them by capital contribution, and a married couple is each deemed to have contributed half of what the two of them put in. The withholding then runs on the foreign person's share of the gross amount realized rather than on the whole price.
Buyer is an individual who's moving in, and the gross amount realized is $300,000 or less. There's no withholding, no form, nothing filed with the IRS, and nothing for anyone to prepare for you. If that's your sale, you're done with this page.
The buyer reports and pays the withheld amount over by the 20th day after the date of transfer, on Forms 8288 and 8288-A. The IRS stamps copy B of the 8288-A and mails it to you at the address on the form. That stamped copy is your evidence, and you need it.
From there the route is a US tax return. Selling a US real property interest puts you inside the effectively-connected regime under section 897, and the 1040-NR instructions say a nonresident alien engaged in a US trade or business must file even with no US source income and even where a treaty exempts the income. The withheld amount goes on line 25f of the return, with a copy of every Form 8288-A attached to the front, and it's credited against the tax computed on your gain. That's the mechanism that turns an over-withheld amount into a refund.
The wait is structural. A return for a calendar year can't be filed until that year ends, and where you didn't have US wages subject to withholding the return is due by the 15th day of the 6th month after your tax year ends. Then the IRS's own instructions ask for patience on this specific class of refund.
Sell in January and the return route doesn't even open for eleven months. Set against a timely certificate, that's weeks against, realistically, more than a year.
There is one route to money before the return is due. If a certificate issues after the transfer and more was withheld than the certificate specifies, you can apply for an early refund of the excess, and an application based on maximum tax liability filed after the transfer can be combined with it. It's paid without interest, and it can't be processed unless the required copy of Form 8288-A is attached.
If the stamped copy never turns up, which happens when your identifying number wasn't on the form, the IRS says to attach substantial evidence of the withholding to the return, closing documents for instance, together with a statement carrying the required information.
If the certificate window is already gone, you're content to wait for the return route, and you can put together a 1040-NR with the stamped Form 8288-A attached, that's a complete answer. The refund doesn't get bigger for having been prepared by a firm, and filing earlier in the season doesn't make it arrive sooner.
The two cases above genuinely don't need a CPA. The ones that do are the sales where the date of transfer is close, where somebody has to work out a maximum tax liability figure with basis, depreciation and treaty adjustments in it, where nobody in the deal has a US identifying number yet, or where the Canadian return for the year of sale is about to be filed and the credit side is about to go wrong.
The Cross-Border Assessment is a flat $249, USD. An hour with a CPA licensed on both sides of the border, then a written summary of your file with a firm quote for whatever the work turns out to be. It credits in full toward the engagement, and it's non-refundable. We publish no price for 8288-B work, certificate applications, ITINs or a 1040-NR because those files vary too much for a number to mean anything before we've seen yours. For the work we do publish prices on, here's what cross-border tax help actually costs, with starting prices.
We can't promise the IRS will issue a certificate, or issue one quickly. The 90-day standard is the IRS's own and it comes with its own exception.
No. The treaty gives the US the right to tax the gain, which is the opposite of sheltering it.
The withholding is a domestic collection mechanism set by section 1445 at 15% of the gross amount realized. It isn't a treaty rate, so there's no reduced-rate article to claim and no form that gets you one.
Where a treaty reduction does bite, in general terms, is inside the certificate calculation. The regulation lists "any reduction of tax to which the transferor is entitled under the provisions of a U.S. income tax treaty" as one of the adjustments to maximum tax liability. That's the mechanism. On a Canadian resident's gain from US real property, Article XIII(1) points the other way.
Canada taxes it too. A resident of Canada is taxed on worldwide taxable income under section 2(1) of the Income Tax Act, and a gain on US property sits inside that base. The treaty then gives a credit for the US tax.
Here's the part that costs Canadians real money. The credit runs on US tax, and an amount withheld is not the same thing as tax paid. The CRA's own folio caps the credit at the finally determined US liability and says a refundable portion isn't tax paid for the year.
So the amount that came off your closing statement isn't the number that belongs on the T1. The withholding was 15% of the gross sale price; the creditable figure is the US tax finally determined on the gain, and the difference between them is money coming back to you rather than tax you paid. Claim the whole withheld amount as a foreign tax credit and the return is wrong on its face.
The two countries also compute the gain in different currencies, from different dates, under different rules, so the US gain and the Canadian gain won't match even before the credit question. We're not going to state a conversion convention here, because that's a rule worth getting from the folio rather than from a web page. And if the T1 for the year of sale has already gone in claiming the full withheld amount, that's worth a conversation rather than a paragraph, since the fix depends on where the US side has got to.
Some do, on their own base, entirely separately from the federal withholding. California is the one worked example here, and nothing on this page should be read across to any other state.
California requires withholding when California real estate is sold or transferred, sent to the Franchise Tax Board under R&TC section 18662. The default method is a share of the gross figure: 3 1/3% of the sales price, boot, or instalment sale payment. There's also an alternative election that applies the applicable tax rate to the gain on sale instead, which is a different base and a different calculation.
Whether a federal withholding certificate does anything to a state's requirement is not something we found an answer to, so we're not asserting one.
This page is general information about the FIRPTA withholding rules, not tax advice for your situation, and it does not calculate anyone's withholding, tax or refund. No outcome with the IRS or CRA is promised. Rules checked against the statute, regulations and IRS forms linked above; current to July 28, 2026.
What the regulation and the form instructions actually ask for: identifying numbers for every party, the contract, adjusted-basis evidence, depreciation schedules or a statement of why depreciation wasn't allowable, the unsatisfied withholding liability figure, and the written notice you owe the buyer before the transfer.
About this page: the withholding described here is 15% of the gross amount realized, or 10% of that same gross amount realized in the residence band where it doesn't exceed $1,000,000 gross, and it is an amount held back on account of a tax that is separately computed on the gain. This page is general information about the FIRPTA withholding rules, not tax advice for your situation, and it does not calculate anyone's withholding, tax or refund. No outcome with the IRS or CRA is promised. Rules checked against the statute, regulations and IRS forms linked above; current to July 28, 2026. Form 8288-B quotes are from the December 2025 revision; Form 1040-NR quotes are from the 2025 instructions.
A flat $249, an hour with a CPA licensed in both countries, and a written summary with a firm quote for whatever your file actually needs. Credited in full if you go ahead.
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