FIRPTA Insight · May 19, 2026 · 7 min read

FIRPTA New York: How Form IT-2663 Withholds 10.90% of Gain at the Closing Table

New York is a stacking state. A foreign seller closing on Manhattan property pays federal FIRPTA at 15% of the gross AND New York's IT-2663 at 10.90% of the gain — and the county clerk will not record the deed until the IT-2663 payment lands.

The thing most foreign sellers miss about New York

It's easy to assume New York doesn't withhold at closing the way California or Hawaii does. The state's nonresident-seller regime is structured differently — it's not framed as a "withholding tax" but as an "estimated income tax payment." That naming difference fools a lot of out-of-state closing professionals.

Functionally, though, it works just like a withholding. Under N.Y. Tax Law §663, a nonresident transferor of New York real property must present Form IT-2663 with full estimated tax payment to the county recording officer at the time the deed is presented for recording. The county clerk is barred from recording the deed otherwise. That payment leaves the closing table the same way a California Form 593 or Maryland MW506NRS payment does.

For a foreign seller, IT-2663 stacks on top of federal FIRPTA. Two filings, two cash transfers at closing, two reduction paths.

The rules at a glance

State rate: 10.90% for 2026 — the highest New York personal income tax rate under N.Y. Tax Law §601. The rate refreshes annually each January with New York's rate schedule.
State base: the GAIN, not the gross sales price. Computed the same as the federal gain (sales price minus adjusted basis minus selling expenses).
State form: Form IT-2663 (with payment voucher IT-2663-V). For nonresident sales of co-op shares, use Form IT-2664 instead.
Deadline: due at deed recording. The recording officer cannot record the deed without either signed TP-584 Schedule D claiming exemption or IT-2663 with full payment. There is no day-count grace window.
Reduction / exemption path: the exemption claim runs through Form TP-584 Schedule D (or TP-584-NYC for New York City conveyances). Statutory exemptions under §663(c) include IRC §121 principal residence, foreclosure conveyance to a mortgagee, US/NYS-agency counterparty, IRC nonrecognition (such as §1031 like-kind), and loss or zero-gain.
Federal layer: 15% of gross under IRC §1445, on Forms 8288 / 8288-A, remitted to the IRS Ogden Service Center within 20 days of closing.
NYC: New York City does not impose a separate nonresident-seller withholding. For NYC conveyances, the exemption claim uses Form TP-584-NYC instead of TP-584, but the IT-2663 mechanic and rate are unchanged. (The NYC Real Property Transfer Tax is a transfer tax paid at closing, not an income-tax withholding, so it is outside the FIRPTA-stack analysis.)

The $1,000,000.00 example

A foreign seller is closing on a $1,000,000.00 condo on the Upper West Side. The seller's adjusted basis is $670,000.00. The gain is $330,000.00. With no reduction certificates in place, here's what comes off the closing table:

Federal FIRPTA (15% of gross): $150,000.00 to IRS Ogden via Form 8288 + 8288-A.
New York (10.90% of gain): $35,970.00 to the county recording officer with Form IT-2663 + IT-2663-V.
Total default closing-table withholding: $185,970.00.

Same closing, different basis. If the same property had a $940,000.00 basis (small gain of $60,000.00), the state side drops to $6,540.00 — 10.90% of $60,000.00 — while the federal side stays at $150,000.00. Because IT-2663 is gain-based and FIRPTA is gross-based, the two regimes scale very differently. On a thin-margin sale, the IT-2663 number is small; on a low-basis sale, it dominates.

And if the actual computed gain is zero or negative (loss, like-kind exchange, treaty exemption, basis stepped up to fair market value through prior nonrecognition events), Form IT-2663 self-zeros on the Part 3 worksheet — Line 19 produces no payment due. The deed still requires the form to be presented, but the form documents that nothing is owed. Federal FIRPTA does not self-zero the same way; it requires Form 8288-B in hand to drop below 15%.

What can be reduced before closing

Both layers have pre-closing reduction paths. They are independent — filing one does not file the other.

Federal: Form 8288-B. The IRS withholding certificate process under Treas. Reg. §1.1445-3. Filed with IRS Ogden requesting that federal withholding be limited to the actual expected federal tax on the gain. On a zero-gain sale, the certificate can authorize $0 federal withholding. Processing runs 60-90 days from a complete submission; file at least 60 days before the projected closing date. IRS Form 8288-B page.

State: TP-584 Schedule D exemption claim. If the transaction qualifies for one of the statutory §663(c) exemptions — principal residence under IRC §121, like-kind exchange under IRC §1031, foreclosure-to-mortgagee, US/NYS-agency counterparty — the seller signs TP-584 Schedule D (or TP-584-NYC) at closing and no IT-2663 payment is required. Outside the statutory exemptions, the path is to compute the gain accurately and pay only what the Part 3 worksheet calculates, not to file a separate "reduction certificate." Form IT-2663 IS the gain-based calculation; there's no California-style "alternative-calculation election" because the gain-based method is the only method.

How state and federal reconcile on the returns

The two withholdings flow to two different returns the year after closing:

Federal Form 1040-NR reports the gain and claims credit for the FIRPTA withheld (stamped Form 8288-A is the credit document). Federal LTCG rates apply. Filing deadline is June 15 for nonresident filers.
New York Form IT-203 (nonresident and part-year resident income tax return) reports the New York-source gain and claims credit for the IT-2663 payment. Refund of any state over-withholding flows from this return.

The federal withholding is not creditable against New York tax; the state IT-2663 payment is not creditable against federal tax. Two parallel calculations, two parallel refunds. An ITIN is required for both filings — the IRS and NYS Department of Taxation and Finance use the taxpayer identification number to match payments to returns.

A trap closing professionals run into

Foreign-seller closings in New York are sometimes handled by closing attorneys who routinely work residential deals where both parties are NY residents. In those deals, IT-2663 isn't on the table — the seller's residency exempts the transaction. When a foreign seller (or any nonresident seller) appears, the form abruptly becomes a precondition to recording. We've seen closings stall because the title company wasn't prepared to wire the IT-2663 payment to the county clerk at recording, then discover that the federal 8288 payment is to a different agency (IRS Ogden), on a different timeline (20 days after closing), via different mechanics. Two payments, two destinations, two timelines — IT-2663 same-day to the county; Form 8288 to IRS Ogden within 20 days.

What we do on New York closings

For New York foreign-seller engagements, the firm prepares Form 8288-B (when there's runway), works the IT-2663 Part 3 worksheet on the seller's actual basis to make sure the closing-table payment is the gain-based number rather than an overcorrection, prepares the Form 8288 / 8288-A closing package within the 20-day federal deadline, coordinates with the closing attorney on the IT-2663 wire to the county clerk, and prepares the Form 1040-NR and Form IT-203 the following filing season. ITINs (Form W-7) are run in parallel when the seller doesn't already have one. Engagement is direct with the seller; there's no fee to the New York title company.

Bottom line

New York DOES withhold at the closing table — through Form IT-2663 under N.Y. Tax Law §663, at 10.90% of the GAIN for 2026.
The county recording officer is barred from recording the deed without either IT-2663 with payment or a signed TP-584 Schedule D exemption claim.
NYC adds no separate withholding; NYC conveyances use TP-584-NYC for the exemption claim, but the IT-2663 mechanic is identical.
Form 8288-B reduces federal withholding before closing; statutory §663(c) exemptions on TP-584 Schedule D eliminate the state payment.
Two returns reconcile the closing-table deposits: Form 1040-NR (federal) and Form IT-203 (New York).

For the New York state landing page and intake form, see FIRPTA New York: Foreign-Seller Closings. For the federal mechanics, see the Foreign Sellers Guide. For the contrast with another high-rate stacking state, see the New Jersey GIT/REP guide.