If you are a U.S. citizen or resident and you receive more than $100,000 in gifts or bequests from a nonresident alien individual or a foreign estate during a tax year, you generally must report it to the IRS on Form 3520. The gift or inheritance itself is usually not taxable income to you. The real risk is missing the filing, because the penalty can reach 25% of the amount received.
These transfers often arrive at meaningful moments, like a parent helping with a first home or an inheritance after a loss. Here is what to know for 2026.
Key takeaways
- Gifts and inheritances from abroad are generally not taxable income to the U.S. recipient, but large ones must be reported.
- Form 3520 is required when gifts or bequests from nonresident alien individuals or foreign estates total more than $100,000 in a tax year, counting gifts from related people together.
- For gifts from foreign corporations or partnerships, the 2026 threshold is more than $20,573.
- Form 3520 is generally due April 15, or October 15 with an income tax extension.
- Penalties for failure to file can be huge: late reporting can cost 5% of the gift per month, up to 25%.
- California has no gift tax or inheritance tax.
Is a Gift or Inheritance From Abroad Taxable in The United States?
Usually not. Federal law excludes gifts, bequests, and inheritances of foreign assets from foreign persons from U.S. estate and gift taxes and from gross income, and California’s Franchise Tax Board likewise tells taxpayers not to include them in income. California also has no gift or inheritance tax on today’s transfers. According to the State Controller’s Office, those taxes are collected only for gifts made, or deaths that occurred, before June 8, 1982.
Two caveats apply. Income the assets earn after you receive them, such as interest, dividends, or rent, is taxable. And gifts from a covered expatriate follow a separate federal tax rule, explained below.
Who Must File Form 3520?
Form 3520 is filed by U.S. persons: U.S. citizens and U.S. residents for tax purposes, such as green card holders.
The donor’s status matters, not where they live. A foreign gift comes from someone who is not a U.S. person, so a gift from a parent who is a U.S. citizen living overseas does not go on Form 3520.
Thresholds depend on who made the gift, as the IRS explains on its gifts from foreign persons page:
| Who made the gift or bequest | Report when the year’s total is | What you itemize |
|---|---|---|
| Nonresident alien individual or foreign estate | More than $100,000 | Each gift or bequest over $5,000 |
| Foreign corporation or foreign partnership | More than $20,573 for 2026 ($20,116 for 2025) | Each gift |
The $100,000 threshold is fixed. The corporate and partnership threshold is adjusted for inflation each year.
What Counts Toward the $100,000 Threshold?
You count amounts received during the tax year that you treat as gifts or bequests, including an inheritance from a foreign estate.
Gifts from related people are combined. You must add together gifts from nonresident aliens and foreign estates if you know, or have reason to know, that they are related to each other or that one is acting as a nominee or intermediary for the other. Relatives include spouses, parents, grandparents, siblings, children, and grandchildren. If your mother gives you $75,000 and your father gives you $40,000 in the same year, the $115,000 total must be reported.
Some payments are not reportable gifts. Qualified tuition or medical payments made on your behalf are not treated as gifts, and a distribution from a foreign trust is reported as a trust distribution instead.
When is Form 3520 Due?
For calendar-year individuals, Form 3520 is due on the 15th day of the 4th month after the tax year ends, generally April 15. For gifts received in 2026, that is April 15, 2027.
- With an income tax return extension: October 15, 2027.
- If you live and work outside the United States and Puerto Rico (or are on military duty outside them): June 15, 2027, with a statement showing you qualify.
- For 2025 gifts, if you extended your 2025 return: October 15, 2026.
The current Form 3520 instructions direct filers to mail the form to the IRS Service Center in Ogden, Utah.
What is The Penalty For Not Filing Form 3520?
If you fail to report a foreign gift on time, the IRS may determine the income tax consequences of the gift and impose a penalty of 5% of the gift amount for each month the failure continues, up to 25%. On a $200,000 inheritance, that could mean a $50,000 penalty.
Failure to report distributions from foreign trusts generates even steeper penalties. An unreported foreign trust distribution can bring an initial penalty of the greater of $10,000 or 35% of the distribution’s gross value.
Under the IRS instructions, no penalty applies if the failure was due to reasonable cause and not willful neglect. If you think you missed a filing, speak with a qualified tax professional promptly.
What Form 3520 Does Not Cover, But Still Matters For The Reporting
Income after the transfer. Interest, dividends, rent, and gains earned after you receive the assets are taxable, federally and in California.
Inherited foreign accounts. If you have a financial interest in, or signature authority over, foreign financial accounts worth more than $10,000 combined at any time during the calendar year, you generally must file an FBAR (FinCEN Form 114). It is filed electronically with FinCEN, not with your tax return, and is due April 15 with an automatic extension to October 15.
You may also need Form 8938, filed with your tax return. For an unmarried taxpayer living in the United States, it generally applies when specified foreign financial assets exceed $50,000 at year-end or $75,000 at any time. Higher thresholds apply to joint filers and people living abroad, and Form 8938 does not replace the FBAR.
Foreign trusts. While distributions from a foreign trust are reported in Part III of Form 3520, a foreign trust with a U.S. owner has its own annual information return, Form 3520-A.
Foreign investment funds. A foreign corporation is a passive foreign investment company (PFIC) if 75% or more of its gross income is passive or at least 50% of its assets produce, or are held to produce, passive income. Some foreign investment funds organized as corporations can meet this test, and PFIC shareholders may need to file Form 8621.
This is a non-exhaustive list that highlights some of the complexities with foreign cross-border transactions.
Gifts From a Covered Expatriate: Section 2801 and Form 708
A covered expatriate is generally a former U.S. citizen or long-term resident who met certain tax liability, net worth, or compliance certification tests when expatriating.
Under Section 2801, a U.S. citizen or resident who receives a covered gift or bequest owes a 40% tax on the amount above the annual exclusion ($19,000 for 2025 and 2026). Final regulations (T.D. 10027) took effect January 14, 2025, and the IRS released Form 708 and its instructions in January 2026.
Form 708 is due on the 15th day of the 18th month after the calendar year of receipt. For 2025 receipts, the IRS instructions give a due date of June 15, 2027.
How Can Families Plan Ahead for Gifts From Abroad?
- Document every transfer and the donor’s status. Keep wire confirmations, gift letters, and estate papers showing who gave what, when, and how much, and whether the donor is a nonresident alien, a U.S. citizen, a foreign company, or a covered expatriate.
- Consider the type of asset. A donor who is a nonresident and not a U.S. citizen may owe U.S. gift tax on gifts of real estate or tangible property located in the United States, and may need to file Form 709-NA if those gifts to one person exceed $19,000 in 2026.
- Coordinate advisers in both countries. Your CPA or tax preparer, your attorney, and the donor’s advisers abroad should talk before a large transfer, not after.
- Plan for the assets once they arrive. Update your estate plan for what you received. In California, property held in a living trust can generally be transferred without going to probate court. Families with ties to more than one country may also benefit from non-citizen and international estate planning and wealth transfer planning.
For more answers, visit our international estate planning FAQ.
How JKZ LLP Can Help
JKZ LLP helps international families plan for gifts and inheritances that cross borders. Our focus is planning and compliance: clarifying your reporting obligations, updating your estate plan for newly received assets, and coordinating with your CPA or tax preparer in the United States and your advisers abroad. We serve clients in English, Spanish, Russian, Arabic, and French from offices in San Francisco, San Diego, Santa Cruz, and Chico. Call 415-693-0550 or contact us online.
This article is for general information only and is not legal or tax advice. Advice varies based on clients’ specific needs and facts. Reading it does not create an attorney-client relationship.