Do I Have to Pay Taxes on Foreign Inheritance?
Foreign inheritance tax involves the rules and reporting requirements when a US person inherits assets from a foreign source. A US person includes US citizens, residents who meet the substantial presence test, Green Card holders, and certain non-resident aliens.
Do I Have to Pay Taxes on a Foreign Inheritance?
No, the IRS does not impose a tax on foreign inheritances or gifts granted to US citizens or resident aliens. However, state taxes may apply, depending on what state you live in.
Do I Need to Report Foreign Inheritance or Gifts?
You will need to report a foreign inheritance or gift from a foreign estate or non-resident alien if it exceeds $100,000. This also applies if you receive multiple inheritances that add up to $100,000 within a single year.
If you receive a gift from a foreign corporation, partnership, or any other type of business exceeding a certain threshold ($19,570 for 2024), you must report it to the IRS. This threshold is adjusted annually for inflation, so be sure to stay updated on your reporting requirements.
What Forms Do I Have to File?
To report a foreign inheritance or gift, complete Form 3520 and file it with the IRS. This is an informational return and doesn’t involve any tax payments. However, failing to file it when required could result in severe penalties.
If your gift or inheritance is in a foreign financial account, even if just briefly, you may have to report it on a Foreign Bank Account Report (FBAR). Not filing an FBAR when required could result in a $12,500 penalty per year. A FATCA report on form 8938 may also be required, and not filing when required could result in a $10,000 penalty. These two reports, an FBAR and a FATCA are informational reports only and do not result in any additional tax.
Let Greenback Expat Tax Services Help You Manage Your Tax Strategy
Still have questions about the foreign inheritance tax? Want a little help with your expat taxes? We’re always happy to lend a hand, as well as with US citizens with foreign business.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.
