Do I Have To Pay Taxes On An Inheritance From A Foreign Relative?

In the United States, those who receive gifts are not required to pay any gift taxes. The burden of paying the gift tax falls on the gift-giver. The same is true for those who receive testamentary gifts. The fact that the gift is from a foreign person is irrelevant.

Although gifts or inheritances from foreign persons are not subject to income tax or an inheritance tax, if the gifts of money or other property are valued over certain amounts, the recipient the gifts must report them to the IRS.

The IRS requires taxpayers to report:

  1. Gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate); or
  2. Gifts valued at more than $13,258 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships).

Additionally, gifts from related parties must be combined. For example, if you receive a gift of $60,000 from your mom and $60,000 from your dad, who are Mexican citizens living in Mexico, you must report the gift because the combined gift totals more than $100,000.

If you receive a gift or inheritance that exceeds these thresholds, you will be required to file Form 3520 with your tax return for the year that the gift was made.

Failing to file Form 3520 accurately or on time may subject you to penalties of 5 percent of the amount of the foreign gift for each month for which the failure to report continues (not to exceed a total of 25 percent).

For more information, visit the IRS’s website by clicking here.

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