Arizona-source income still matters when you live abroad
Arizona law limits a nonresident’s Arizona gross income to the portion of federal adjusted gross income from Arizona sources.Arizona Legislature Living overseas does not make the state-source question disappear.
The 2025 Form 140NR has separate federal and Arizona columns for gains and losses, and for rents and related income.Arizona DOR If the property earned rental income before the sale, bring those records alongside the closing papers. Ask your preparer which amounts belong in the state column.
State residency and federal nonresident status should both be reviewed. Describe any move into or out of Arizona during the year instead of deciding the form from your passport. Use the forms for the actual tax year of sale.
Purchase date can affect an Arizona capital-gain subtraction
Arizona law provides a 25% subtraction for qualifying net long-term capital gain included in federal adjusted gross income from assets acquired after December 31, 2011. The 2025 Form 140NR includes a corresponding calculation.Arizona LegislatureArizona DOR It is a subtraction from income, not a refund of 25% of the property price.
Keep the purchase closing statement so the acquisition date can be verified. For property received by gift or inheritance, the statute uses the transferor’s acquisition date for this rule. If the date cannot be verified, the statutory subtraction is not allowed.Arizona Legislature
Ask the preparer to review the gain’s character and eligibility. Rental depreciation and other components of a property sale need their own treatment; do not label the entire sale price a qualifying long-term gain.
The escrow report does not replace your return
Arizona law requires qualifying licensed escrow businesses to report real-property sales that fall under federal real-estate reporting rules. The state information return uses the federal form and format.Arizona Legislature Keep any sale information statement with your records.
This reporting duty is not a federal FIRPTA refund claim and is not the seller’s Arizona income-tax return. Ask escrow for the information return, the sale statement and the federal withholding forms as separate documents.
Check the seller name, property address, closing date and ownership share across the records. If title changed through a trust, an estate or an entity before sale, give the preparer that history before a number or return is prepared in your personal name.
Prepare the state calculation from the federal records
Form 140NR calculates an Arizona income ratio from Arizona gross income and federal adjusted gross income. Its schedules also distinguish Arizona-source net capital gains, short-term gains and long-term gains.Arizona DOR A federal refund estimate is therefore not an Arizona refund estimate.
Provide the completed federal schedules, the property purchase and sale statements and any previous Arizona returns. If there are Arizona depreciation adjustments in earlier rental returns, preserve that history for the year of sale.
This guide does not add an Arizona real-estate withholding percentage without official confirmation. Ask the closing agent what each deduction is and which authority received it. Federal withholding paid to the IRS should be traced using the IRS forms.
How the federal FIRPTA refund is worked out
FIRPTA generally requires 15% withholding on the amount realized, with exceptions and reduced rates for certain sales.IRS The seller’s final federal tax is calculated on the return; withholding is a credit against that result.IRS A refund depends on the actual calculation and cannot be promised from the sale price alone.
A withholding certificate request on Form 8288-B is a separate process from a later refund return. If one was submitted, keep its date and the IRS response with the closing papers.IRS For an individual foreign seller, have the Form 1040-NR filing reviewed with the property history.
If an ITIN is needed, W-7 has a specific real-property exception and supporting-document rules.IRS Applying for the number alone does not claim your refund. Nolly.com’s FIRPTA refund service starts at US$499 and includes the ITIN application if you need one. Ask which state work is included in your quote.
Prepare your sale records in four steps
- 1
Review the seller and the closing
Confirm ownership, the sale date and which authority received each withholding payment.
Your transaction - 2
Collect the state records
Gather the state documents explained above alongside the signed purchase and sale statements.
Property file - 3
- 4
File and track each result
Prepare the federal return with withholding evidence, and review any separate state filing. Keep notices for each authority.IRS
After closing
Get help with your FIRPTA filing
Start with the whole property sale, including any state records. Nolly.com is an IRS-listed Certifying Acceptance Agent. If you need an ITIN, your interview is a live video call. No mailing your original passport to the IRS.
The IRS has typically taken about 9 to 11 weeks for ITIN applications lately. Timing depends on the IRS and your application; that is not a FIRPTA refund timeline. Refund processing and any state filing follow their own process.
FIRPTA refund
Claim back tax withheld when you sold U.S. property.
Includes:
- Closing statement and Form 8288-A reviewed
- Form 1040-NR prepared to claim the refund
- Filed with the IRS
- Status updates
- ITIN application included, if you need one
Your questions answered
The state reviews Arizona-source income under its nonresident rules. Have the gain and filing requirement reviewed even if you live abroad.Arizona LegislatureArizona DOR
It is the nonresident personal income-tax return. The form separates federal amounts from Arizona-source amounts.Arizona DOR
No. It is an income subtraction for qualifying net long-term gain and has acquisition-date and other requirements.Arizona Legislature
No. The escrow information report and your state income-tax return are different documents with different purposes.Arizona LegislatureArizona DOR
FIRPTA refund help starts at US$499 and includes the ITIN application if needed. Ask for the scope and price of any state filing before paying.
Only if the final tax and withholding credit produce that result. Withholding is not a guaranteed refund.IRS
More questions? See the full Nolly.com FAQ.
How we checked this
Every IRS fact on this page comes from IRS.gov or the other official pages listed below and was checked on October 3, 2026. Nolly.com's own prices are the only exception. Nolly.com is a private company and is not part of the IRS.
Nolly Services Inc, d/b/a Nolly.com, appears on the IRS page Acceptance agents – Canada. Nolly.com is a private company and isn't part of the IRS.
- Instructions for Form W-7 (Rev. 12-2024)https://www.irs.gov/instructions/iw7
- FIRPTA withholdinghttps://www.irs.gov/individuals/international-taxpayers/firpta-withholding
- Reporting and paying tax on U.S. real property interestshttps://www.irs.gov/individuals/international-taxpayers/reporting-and-paying-tax-on-us-real-property-interests
- Withholding certificateshttps://www.irs.gov/individuals/international-taxpayers/withholding-certificates
- ITIN guidance for foreign property buyers/sellershttps://www.irs.gov/individuals/international-taxpayers/itin-guidance-for-foreign-property-buyers-sellers
- 2025 Arizona Form 140NR booklet (official indexed text reviewed)https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140NRBooklet.pdf
- ARS 43-312: reporting real estate transactionshttps://www.azleg.gov/ars/43/00312.htm
- ARS 43-1022: subtractions from gross incomehttps://azleg.gov/ars/43/01022.htm
- ARS 43-1091: gross income of a nonresidenthttps://www.azleg.gov/ars/43/01091.htm
Checked against IRS.gov on October 3, 2026. General information, not tax advice.
