Selling your US home before moving to India: the exclusion window and FIRPTA timing

If you own a home in the US and plan to move back to India, the house is usually the largest single item on your departure list. Two separate US rules shape what you keep from a sale. One is the home sale exclusion, which can remove some or all of the gain from US tax. The other is FIRPTA withholding, which can hold back part of the sale price if the sale closes after you have become a nonresident.

This guide explains both, then runs them through one worked example. It follows the same rules the Wind-Down Planner uses, and each one links to its official source.

The home sale exclusion

You can exclude gain on the sale of your home from US tax if you sell within five years of living in it and you have at least 730 days of use. The planner counts the use period from the day you move in to the day you move out.

Two details change the amount:

• Filing status. A married couple filing jointly gets $500,000 only if both spouses meet the use test.
• Depreciation. If you rent the home out and claim depreciation, that depreciation is taxable when you sell.

If your use is under 730 days, you may still qualify for a reduced exclusion, for example because of a job change or unforeseen circumstances. If the exclusion is reduced or lost, the gain above it is taxed.

The planner shows the exposure as the gain you would lose the exclusion on, before improvements and selling costs. It is an estimate, not a tax calculation.

FIRPTA: why the closing date matters

FIRPTA is the rule that makes the buyer withhold tax from the sale price when the seller is a nonresident. The timing point is simple: close the sale while you are still a US tax resident. After you become a nonresident, the buyer must withhold from the sale price.

The details from the IRS page the planner cites:

• The default rate is 15%.
• Reduced rates apply when the buyer will live in the home: 0% up to $300,000 and 10% up to $1 million.
• The amount is recoverable through a US return, but refunds can take months.

For planning, the practical effect is cash flow. You may leave the US without access to part of your sale proceeds, and wait for a refund.

The planner suggests aiming to close at least 30 days before you leave. That margin is the planner's own choice, so the sale is done while you are still a US tax resident. Closing after you leave can trigger withholding and can also delay your sailing permit, which is covered in the sailing permit guide.

Sell before you leave, or rent it out

The choice is between selling before you leave, and renting the home out and selling later. Each path has a different clock.

Selling first. The planner works backwards from the closing target. It uses the speed of your local market to decide when to list, and a preparation period before that for repairs, decluttering and choosing an agent. If those dates are already in the past, the sale may not close before you leave.

Renting first. Renting keeps the home but adds tasks and a deadline. You hire a property manager and get landlord insurance before you leave. Give the manager Form W-8ECI to elect net-basis taxation. Otherwise 30% of gross rent is withheld. And you must still sell by the date that keeps the exclusion, and the planner measures the five-year window from your move-out date.

The planner shows the latest sale date for the rent-out path. It is the end of the five-year window minus the 730 days of use you need, so use fewer than 730 days and the full exclusion is not available.

A worked example

Take a couple filing jointly who arrived in the US about 8 years ago and plan to leave in 24 months, on 9 October 2028. They bought their home on 1 June 2021 for $500,000 and moved in the same day. They estimate it is worth $650,000 today. They also hold RSUs and a 401(k), which the RSU and ESPP guide and the 401(k) guide cover.

The exclusion. By their departure date they have used the home for well over 730 days. The estimated gain is $150,000, before improvements and selling costs. That is under the $500,000 a jointly filing couple can exclude, provided both spouses meet the use test. The planner shows the $150,000 as the amount at risk if they lose the exclusion by missing the window.

If they sell before leaving. With a normal market speed, the planner works back from a closing target of 9 September 2028, which is 30 days before departure:

Closing by 9 September means the sale is done while they are still US tax residents, which is the point of the FIRPTA timing rule.

If the sale slips past departure. The planner estimates withholding at 15% of the estimated sale price: $97,500 on $650,000. Reduced rates of 0% or 10% could apply if the buyer will live in the home, and the amount is recoverable, but not quickly.

If they rent it out. They would need a property manager and landlord insurance before 9 September 2028, Form W-8ECI for the manager, and a sale by 10 October 2031 to keep the exclusion.

The decision. The planner puts the sell-or-rent decision between 9 July and 9 October 2027, which is 15 to 12 months before departure. That is early enough to list, and to rent if the sale does not work out.

If the move is not planned

If you are leaving because of a job loss, the clock is shorter. The planner treats the sell-or-rent decision as something to settle within a week, and any step that is already compressed counts against selling. The job-loss version of the planner shows what is still possible from your last working day.

Questions to take to your adviser

• Do both spouses meet the 730-day use test, and by what date?
• Did I claim depreciation while renting any part of the home?
• If I close after I leave, will the buyer live in the home, and does a reduced FIRPTA rate apply?
• If I rent it out, by what date must I sell to keep the exclusion?

Next step

Enter your departure date and home details in the Wind-Down Planner to see your own dates and the amounts at risk. If you are leaving after losing a job, use the job-loss version. Confirm with a cross-border CPA.

This is a planning timeline, not tax, legal or immigration advice. Rules change; each item links to its official source and shows when it was last checked.

Sources

Last checked: 9 October 2026.

• IRS, Topic 701, sale of your home: https://www.irs.gov/taxtopics/tc701
• IRS, FIRPTA withholding: https://www.irs.gov/individuals/international-taxpayers/firpta-withholding
• IRS, Publication 519: https://www.irs.gov/publications/p519