U.S. Tax and Inheritance Abroad

What Americans Abroad Should Know About U.S. Inheritance and Gift Tax

Does the U.S. tax foreign inheritances?

If you’re a U.S. citizen or Green Card holder, you do not owe tax on an inheritance you receive from a non-U.S. person—whether it’s money, property, or assets located outside the United States.

However, if the inheritance exceeds $100,000, you are required to report it to the IRS using Form 3520. This is an informational form, but failure to file can result in hefty penalties.

I’m a U.S. citizen living abroad. Do I need to report an inheritance?

Yes—if you receive more than $100,000 from a non-U.S. estate (or more than $16,000 in gifts from a non-resident foreign individual), you must file Form 3520 to report it.

You won’t pay tax on it, but not reporting can lead to fines of up to 25% of the amount received.

What is Form 3520?

Form 3520 is used to report:

• Gifts or inheritances from foreign individuals or estates over $100,000

• Gifts from foreign corporations or trusts over certain thresholds

• Distributions from foreign trusts

It’s not part of your regular tax return – you must file it separately, and it has the same deadline as your Form 1040 (including extensions).

What if I inherit assets located in the U.S.?

If you inherit U.S.-situs assets (such as real estate or U.S. stocks) from a non-U.S. person, the estate may owe U.S. estate tax. This depends on:

• The type and location of the assets
• The value of the estate
• Whether a tax treaty applies

This can be complex—especially if you are both the beneficiary and a U.S. taxpayer. We strongly advise getting professional guidance.

Are gifts from foreign family members taxable?

No, gifts are not taxable to the recipient—but they may still need to be reported to the IRS using Form 3520.

• If you receive more than $100,000 in total from foreign individuals or estates in a year → report on Form 3520

• If you receive more than $16,000 from a foreign corporation or partnership → also report

There’s no tax, but penalties for late or missing forms are real.

What about gifts I give as a U.S. person?

U.S. citizens and residents are subject to the U.S. gift tax rules, regardless of where they live. You may need to:

• File Form 709 for gifts over the annual exclusion (currently $18,000 per recipient in 2024)

• Keep track of your lifetime gift and estate tax exemption (currently over $13 million, but subject to change)

Giving to a non-U.S. spouse? Lower thresholds apply. This area gets tricky fast—speak to a tax advisor before giving large gifts abroad.

What if I’m named as a beneficiary of a foreign trust?

Receiving money from a foreign trust as a U.S. taxpayer can trigger:

• Form 3520 to report distributions

• Possibly Form 3520-A (if you’re the owner of the trust)

• Income tax on undistributed income and punitive interest charges

This is one of the most complex areas of expat taxation. Do not attempt to file this alone – get professional help.

How can Expats Overseas help?

At Expats Overseas, we help Americans abroad understand and meet their IRS obligations when it comes to:

• Foreign inheritances and gifts

• U.S. estate and gift tax compliance

• Correctly filing Form 3520 and other required disclosures

• Avoiding penalties for non-reporting

We work with experienced CPAs who specialize in international taxation.

Contact us today for a free, no-obligation consultation. We’ll help you protect your inheritance—and your peace of mind.