New York welcomes foreign capital, and foreign nationals may freely own real property here. What surprises most international buyers is that owning U.S. real estate places them inside three separate federal and state tax systems at once — income, transfer, and estate & gift — each of which treats a non-resident very differently from a citizen. The property is the easy part. The ownership structure is where fortunes are made or quietly forfeited.
This page is an orientation, not a manual. It is meant to give you a sound understanding of the terrain and an honest sense of where the hazards lie. It is deliberately not a set of instructions, because the single most expensive mistake foreign buyers make is treating structure as a checkbox rather than a decision — one that cannot be unwound after title transfers.
01The estate-tax trap most buyers never see coming
A U.S. citizen or domiciliary can pass many millions of dollars in assets to heirs before a dime of federal estate tax is due. A non-resident, non-citizen who dies owning U.S.-situs property — and U.S. real estate is squarely U.S.-situs — is allowed an exemption of $60,000. Everything above that line is exposed to federal estate tax at rates that climb to 40%.
A $2,000,000 Manhattan apartment held directly by a foreign owner can generate roughly $700,000+ in U.S. estate tax at death — on property the heirs cannot easily sell, refinance, or even retitle until the estate is cleared.
This is not a rare edge case; it is the default outcome of buying in your own name. Whether it can be reduced, deferred, or eliminated depends on how the asset is held, where you are domiciled, and whether a treaty applies. Those levers exist — but each one trades off against income tax, liability exposure, and cost, which is precisely why they cannot be pulled blindly.
02FIRPTA: the toll on the way out
When a foreign person sells U.S. real property, the buyer is generally required by the Foreign Investment in Real Property Tax Act (FIRPTA) to withhold a percentage of the gross sale price — not the gain, the price — and remit it to the IRS. The headline rate is 15%, with narrow reductions and exemptions tied to price and the buyer's intended use.
That withholding is a prepayment, not a penalty, and mechanisms exist to reduce it to the actual tax owed. But the foreign seller who is unaware of FIRPTA discovers it the hard way: a six-figure sum held back at a closing they assumed would deliver full proceeds. Anticipating and managing this before listing — and ideally before buying — is part of getting the structure right.
03New York's layered transfer taxes
Separate from anything federal, New York imposes its own toll booths on the transfer itself, and they stack:
NYS Transfer Tax
A statewide tax on consideration, typically borne by the seller, with an additional layer on higher-value residential and commercial transactions.
NYC RPTT
Within the City, a separate Real Property Transfer Tax applies on a progressive scale that differs for residential and commercial property.
The "Mansion Tax"
Residential purchases at and above $1M trigger a buyer-side tax that escalates with price, reaching into the high single digits at the top.
None of these is difficult to calculate in isolation. The difficulty — and the planning opportunity — lies in how they interact with one another, with your chosen entity, and with the financing and timing of the deal.
04Why the obvious answers usually backfire
Most international buyers arrive with a plan already in mind. Almost all of those plans solve one problem while creating a larger one elsewhere. A few of the most common:
"I'll just buy it in my own name."
Simplest at closing, and a direct line to the $60,000 estate-tax exposure above. Simplicity here is not economy.
"I'll put it in an LLC — that solves everything."
An LLC can serve real purposes, but a single-member LLC is frequently disregarded for tax, meaning it may do nothing for the exposure people assume it cures.
"I'll use a U.S. corporation."
It changes the analysis — and not always in your favor. Shares of a domestic corporation carry their own situs and tax consequences that can defeat the original goal.
"A foreign company will keep the U.S. out of it."
Sometimes the centerpiece of a sound plan, sometimes a costly detour into corporate-level taxation. Which one it is depends entirely on facts that have nothing to do with the property.
Notice what each of these has in common: a reasonable instinct, applied without the surrounding analysis, producing the wrong result. The correct vehicle for one buyer is malpractice for the next.
05What actually drives the right structure
There is no universally correct holding structure for foreign-owned U.S. real estate — and any advisor who offers you one before asking questions should be a concern, not a relief. The available vehicles range from direct ownership through domestic and foreign entities, multi-tier arrangements, and various trust forms. Choosing among them turns on facts such as:
Hold or flip
A long-term legacy asset and a property you intend to resell in three years call for entirely different planning.
Use of the property
Personal residence, rental income, or pure investment each change the income-tax posture and the structuring math.
Your home country & treaty
Whether an estate-tax treaty exists between the U.S. and your country of domicile can transform the entire calculus.
Add to these your heirs, your other U.S. holdings, your tolerance for filing obligations, and your liability concerns — and the reason a template cannot serve becomes self-evident. The right structure is engineered backward from your goals, not selected from a menu.
06The one principle that survives every variation
Whatever your circumstances, one rule holds: the time to structure ownership is before you sign a contract — ideally before you make an offer. Almost everything on this page is far cheaper to plan than to repair. Title, once taken, is difficult and expensive to rearrange, and several of the most valuable strategies are simply unavailable once the deal has closed in the wrong name.
The property is a transaction. The structure is a decision you live with for as long as you own it — and your family lives with after you. The first is worth doing well. The second is worth doing with counsel.