US Gift Tax for American Expats & Non-Resident

American citizens and green card holders living abroad remain subject to U.S. gift tax on worldwide transfers. Non-resident aliens are taxed only on certain U.S.-situs tangible assets. Understanding the rules for Form 709, Form 709-NA, and Form 3520, along with projected 2025 thresholds, is crucial for global families to ensure compliance and avoid significant penalties.

U.S. gift tax for Americans overseas is a critical consideration for American expats who want to transfer wealth internationally. Whether you're an American expat sending money to family overseas or receiving gifts from foreign sources, understanding these tax obligations is essential. This comprehensive guide covers everything US expats need to know about gift taxation, including Form 709-NA requirements for non-resident aliens, Form 3520 requirements, and projected 2025 thresholds.

Who is Subject to US Gift Tax for Expats?

The U.S. gift tax applies to transfers of property where full value is not received in return. For American expats, the rules differ significantly based on the donor's status and require careful attention to compliance requirements set by the Internal Revenue Service (IRS).

For U.S. persons (citizens and resident aliens/green card holders), including American expats living anywhere in the world, the obligation is global. All gifts, regardless of where the asset is located or where the recipient resides, are subject to U.S. gift tax rules and must be reported on Form 709.

For Non-Resident Aliens (NRAs), the rules are much narrower. An NRA is only subject to U.S. gift tax on transfers of tangible property physically located within the United States, which must be reported on Form 709-NA. This includes assets like U.S. real estate, vehicles, or artwork. According to U.S. Treasury regulations, intangible property—such as shares in U.S. corporations, partnership interests, or funds in a U.S. bank account—is exempt from gift tax for NRAs.

On the receiving end, while there is no U.S. tax on receiving a gift, U.S. persons must report large gifts or bequests received from foreign sources using Form 3520. This dual system—tax on giving for U.S. persons and NRAs (for tangible U.S. property), and a reporting requirement on receiving—demands careful planning, especially for cross-border families.

Form 709 vs. Form 709-NA vs. Form 3520 - Key Forms Explained

Understanding which form to use is the first step toward compliance for US expats and non-resident aliens. Form 709 is for U.S. persons reporting gifts they've given, Form 709-NA is specifically for non-resident aliens reporting gifts of U.S. tangible property, while Form 3520 is for reporting gifts you've received from foreign sources—a common scenario for American expats with international family connections.

2025 Annual Exclusions & Lifetime Exemptions

The IRS provides generous exemptions that allow most people, including American expats, to give gifts without paying tax. These figures are adjusted for inflation annually by the Tax Foundation. (Note: 2025 figures are projections based on inflation trends and will be officially confirmed by the IRS in late 2024.)

• Annual Gift Exclusion: For 2025, it is projected to be $19,000 per recipient (up from $18,000 in 2024). A U.S. person can give up to this amount to any number of individuals during the year without filing a gift tax return or using any lifetime exemption.
• Lifetime Gift and Estate Tax Exemption: This is a unified credit that applies to both gifts made during your lifetime and your final estate. For 2025, it is projected to be $13.99 million per individual (up from $13.61 million in 2024). Gifts exceeding the annual exclusion reduce this lifetime amount.
• NRA Exemptions: Non-resident aliens can also use the annual gift exclusion ($19,000 projected for 2025) for gifts of U.S. tangible property. However, they do not have a lifetime gift tax exemption. Their estate tax exemption for U.S.-situs assets is only $60,000.
• Form 3520 Reporting Thresholds: A U.S. person must file Form 3520 if they receive more than $100,000 from a non-resident alien individual or foreign estate, or more than a projected $20,150 for 2025 from a foreign corporation or partnership.

Special Rules for US Expats: Spouses, Trusts, and Cross-Border Gifts

Cross-border relationships and complex assets introduce additional rules that are critical for compliance, especially for American citizens living abroad. The American Institute of CPAs (AICPA) provides guidance on these complex scenarios.

• Gifts to Spouses: Unlimited tax-free gifts can be made between U.S. citizen spouses. However, if the recipient spouse is not a U.S. citizen, the gift is subject to a special annual exclusion, projected to be $193,000 for 2025 (up from $185,000 in 2024).
• Direct Tuition and Medical Payments: A crucial and often overlooked strategy for US expats is making direct payments for another person's tuition or medical expenses. Payments made directly to the educational institution or medical provider are completely exempt from gift tax, regardless of the amount, and do not use up any annual or lifetime exclusion.
• Gifts to Trusts: Transferring assets to a trust is considered a gift. If the trust is foreign or has foreign beneficiaries, complex reporting rules on Form 3520 and Form 3520-A may be triggered. For NRAs, gifts to trusts must be carefully structured.
• NRA Gifting Strategy: Since NRAs are only taxed on U.S. tangible property, a key planning strategy is to gift exempt intangible assets (like U.S. stocks) or assets located outside the U.S. This is a critical distinction from U.S. persons who are taxed on worldwide gifts.

Step-by-Step Filing Guide for American Expats in 2025

Accuracy is critical when preparing these forms for American citizens abroad. Filings are generally done on paper, though some providers may support e-filing. The IRS Form 709 instructions recommends following these steps carefully.

For Form 709 (U.S. Person Givers):

1. Identify all gifts made: List every transfer of value to each individual, including international transfers common among US expats.
2. Apply Annual Exclusions: Subtract the annual exclusion ($19,000 for 2025) for each recipient to determine your total taxable gifts.
3. Complete Form 709: Report all gifts, even non-taxable ones that require disclosure (like gift splitting with a spouse). Calculate tax and apply your available lifetime exemption.
4. File by the Deadline: The form is due April 15, 2026, for gifts made in 2025. Mail the return to the IRS service center listed in the form instructions.

For Form 3520 (Receivers) - Critical for American Expats:

1. Track Foreign Gifts: Aggregate all gifts received from foreign individuals and entities throughout the year—a common scenario for US expats.
2. Check Reporting Thresholds: Determine if you exceeded the $100,000 (individual) or ~$20k (corporate) thresholds.
3. Complete Form 3520: Use Part IV to report the gifts, providing the date, description, and value of the property received.
4. File with Your Tax Return: Attach Form 3520 to your Form 1040 and file by your regular tax deadline, including extensions.

Form 709-NA: Complete Guide for Non-Resident Aliens

Form 709-NA is specifically designed for non-resident aliens who make gifts of U.S. tangible property. Understanding this form is crucial for NRAs with U.S. assets or those making gifts to U.S. persons.

Who Must File Form 709-NA?

Non-resident aliens must file Form 709-NA in the following situations:

• You gave gifts of real or tangible personal property situated within the United States totaling more than the annual exclusion ($19,000 projected for 2025, or $193,000 to a non-citizen spouse).
• You made gifts of future interests in U.S. tangible property, regardless of value.
• You are a "covered expatriate" under section 877(b) and made gifts of U.S.-situs intangible property.

Form 709-NA Filing Process:

1. Determine Your Status: Confirm you are a non-resident alien (not domiciled in the U.S. and not a U.S. citizen).
2. Identify Taxable Gifts: Only U.S. tangible property gifts need reporting. Examples include:
   • U.S. real estate (land, buildings)
   • Physical personal property located in the U.S. (cars, boats, art, jewelry)
   • Cash if physically located in the U.S. at the time of gift
3. Calculate Tax: Apply the annual exclusion, then calculate tax at 18%-40% rates with NO lifetime exemption available.
4. File on Time: Due April 15 following the year of the gift, with extension available to October 15.
5. Mail to: Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999

Special Considerations for Form 709-NA:

• Joint Tenancy: Creating joint tenancy in U.S. real estate may trigger a gift requiring Form 709-NA filing.
• Treaty Benefits: Gift tax treaties with Australia, Austria, Denmark, France, Germany, Japan, and the UK may provide relief. Attach Form 8833 if claiming treaty benefits.
• Generation-Skipping Transfer (GST) Tax: Form 709-NA also reports GST tax on direct skips to grandchildren or lower generations.
• No Gift Splitting: Unlike U.S. persons, NRA spouses cannot elect to split gifts. Each must file their own Form 709-NA if required.

Risks, Penalties, and Planning Strategies

Failure to comply with gift tax rules can be costly for American citizens abroad and non-resident aliens. Late filing or non-payment on Form 709 or Form 709-NA can lead to penalties up to 25% of the tax due, plus interest. For Form 3520, the penalties are particularly harsh: late filing can trigger a penalty of 5% of the gift's value per month, capped at a total of 25%. Given that no tax is even due, this penalty is purely for non-disclosure.

Strategic Planning for Different Taxpayer Types:

For U.S. Persons (Form 709):

• Leveraging Exclusions: Maximize the use of the annual gift exclusion and direct payment exclusion for tuition and medical expenses.
• Gifting Appreciating Assets: Gifting assets that are expected to grow in value can remove future appreciation from your taxable estate.
• Gift Splitting: Married U.S. couples can combine their annual exclusions to give up to $38,000 (projected for 2025) to a single recipient tax-free.
• Using Lifetime Exemption: With $13.99 million available (projected 2025), large gifts can be made without paying tax.

For Non-Resident Aliens (Form 709-NA):

• Intangible Asset Strategy: Since U.S. stocks and bonds are not subject to gift tax for NRAs, prioritize gifting these over tangible property.
• Situs Planning: Consider holding U.S. real estate through foreign corporations to potentially convert tangible property to intangible shares.
• Annual Exclusion Maximization: Without a lifetime exemption, staying within annual exclusion limits is critical.
• Treaty Benefits: Explore gift tax treaties that may provide additional exemptions or reduced rates.

For Gift Recipients (Form 3520):

• Documentation: Keep detailed records of all foreign gifts received, including donor information and gift descriptions.
• Aggregation Rules: Remember that gifts from related foreign persons must be aggregated when determining reporting thresholds.
• Timely Filing: File Form 3520 with your income tax return to avoid the severe 25% penalty.

Take Action: Achieve Gift Compliance Today

The complexities of gift and estate tax for American citizens living abroad and non-resident aliens require specialized knowledge to optimize transfers, ensure full compliance, and mitigate risk. At American Expat CPA, our team of experts handles Forms 709, 709-NA, and 3520, develops international wealth transfer strategies tailored specifically for US expats and non-resident aliens, and provides penalty abatement support.

Schedule a consultation today for personalized advice on Forms 709, 709-NA, and 3520, and gain peace of mind in your cross-border financial affairs. Our expertise in both U.S. person and non-resident alien gift tax issues ensures comprehensive planning for international families.

Disclaimer: The information in this page is provided for general reference only and should not be considered professional tax advice. Before making any decisions or taking action based on this information, you should seek appropriate professional guidance. While efforts have been made to ensure accuracy and completeness, no guarantee is provided, and we accept no responsibility or liability for any outcomes resulting from reliance on the information provided on this page.