A green card holder who is domiciled in the United States receives the same federal estate tax exemption as a U.S. citizen. For 2026, the green card holder estate tax exemption is $15 million per person, so estates below that amount owe no federal estate tax.1Internal Revenue Service. Estate Tax The catch sits in one word. Holding a green card is not the same as being domiciled in the U.S., and a lawful permanent resident who has effectively moved abroad can fall to the nonresident alien exemption of just $60,000. Almost everything else in the rules turns on which side of that line you are on.
Why Domicile, Not the Green Card, Controls the Exemption
For estate tax, the IRS does not treat a green card as automatic proof of U.S. residency. It applies a facts-and-circumstances test: did the person live in the United States with no definite intention of leaving?2Internal Revenue Service. International Estate and Gift Tax Examinations That is different from the income tax rule, where the green card alone establishes tax residency.
The factors examiners look at include where you kept your primary home, where your family lived, where your bank and investment accounts sat, your community and social ties, and where you voted or held professional licenses. A green card holder who retired abroad, sold the U.S. home, and moved most of their financial life overseas may not be domiciled here at death, even if the card was never formally surrendered. In that situation the estate is treated as a nonresident alien’s, with a $60,000 exemption and tax limited to U.S.-located assets.3Internal Revenue Service. Estate Tax for Nonresidents Not Citizens of the United States
Domicile is subjective, and the IRS and an executor can disagree. If you hold a green card but spend long stretches outside the country, documenting your intent to remain domiciled in the U.S. is worth the effort. If you have effectively moved away, assuming your heirs will still get the full $15 million shield can produce a punishing tax bill.
What the $15 Million Exemption Covers
The basic exclusion amount for 2026 is $15 million per individual.4Internal Revenue Service. Rev. Proc. 2025-32 The One Big Beautiful Bill Act set that figure as a permanent floor in place of the temporary increase from the 2017 Tax Cuts and Jobs Act, with inflation adjustments beginning in 2027. For a married couple where both spouses are domiciled in the U.S., the combined exemption can shield up to $30 million.
If you are domiciled here, your gross estate covers everything you owned at death, wherever it sits. That means real estate, bank accounts, investments, business interests, and personal property worldwide.5Office of the Law Revision Counsel. 26 USC 2031 – Gross Estate An apartment you still own in your home country counts toward the total.
Above the $15 million line, the excess runs up a graduated scale that reaches 40% on amounts more than $1 million past the exemption.6Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax The unified credit zeroes out the tax on the first $15 million, and most of what sits above lands in the top bracket. A nonresident who was not domiciled here gets only the $60,000 exemption and is taxed only on U.S.-situated assets.3Internal Revenue Service. Estate Tax for Nonresidents Not Citizens of the United States The gap between $15 million and $60,000 is the largest single financial consequence of the domicile determination.
The Non-Citizen Spouse Problem
A U.S. citizen can leave any amount of property to a citizen spouse with no estate tax, using the unlimited marital deduction.7Office of the Law Revision Counsel. 26 US Code 2056 – Bequests, Etc., to Surviving Spouse That deduction is not available when the surviving spouse is not a U.S. citizen, even if the survivor holds a green card. The concern behind the rule is that a non-citizen spouse could leave the country with the assets before the IRS ever collects tax at the second death.
Qualified Domestic Trust
The standard fix is a Qualified Domestic Trust, or QDOT. Instead of passing assets outright to a non-citizen spouse, the estate places them in a trust that qualifies for the marital deduction and defers the estate tax.8Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust The tax is collected later, either when principal is distributed from the trust or when the surviving spouse dies.
To qualify, at least one trustee must be a U.S. citizen or a domestic corporation, and that trustee has the right to withhold estate tax from any principal distribution. The surviving spouse can take income from the trust without triggering tax. Principal can also come out tax-free in cases of genuine hardship. Treasury regulations impose additional security requirements, such as a bond or letter of credit, when trust assets are substantial.9Internal Revenue Service. Instructions for Form 706-QDT The executor must affirmatively elect QDOT treatment on the estate tax return. Miss the election and the marital deduction is lost, which can generate millions in immediate liability.
Lifetime Gifts to a Non-Citizen Spouse
The same citizenship rule cuts into gifts made during life. Transfers to a non-citizen spouse are capped at an inflation-adjusted annual amount instead of the unlimited marital deduction that applies between two citizens.10Office of the Law Revision Counsel. 26 USC 2523 – Gift to Spouse For 2026, the limit is $194,000.11Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States Anything above that counts against the donor’s lifetime exemption and requires a gift tax return.
Portability of a Deceased Spouse’s Unused Exemption
When the first spouse dies without using the full $15 million exemption, the leftover can pass to the survivor. If the first spouse’s estate was $5 million, the remaining $10 million transfers, giving the survivor a combined $25 million shield.
Portability is available to domiciled green card holders. The executor claims it by filing a timely estate tax return, even when no tax is owed. It is not available to the estate of a nonresident who was not a U.S. citizen.12Internal Revenue Service. Frequently Asked Questions on Estate Taxes for Nonresidents Not Citizens of the United States So if the IRS decides the deceased green card holder was not actually domiciled here, the portability election fails and the surviving spouse loses access to that unused exemption entirely.
Credit for Foreign Death Taxes
Because a domiciled green card holder is taxed on worldwide assets, the same property can be taxed by both the U.S. and a foreign country. Federal law offsets that with a credit: the estate can reduce its U.S. estate tax by the estate, inheritance, or succession taxes paid to a foreign government on the same property.13Office of the Law Revision Counsel. 26 USC 2014 – Credit for Foreign Death Taxes The credit cannot exceed the share of U.S. estate tax attributable to the foreign property, and it applies only to taxes actually paid.
The U.S. also has estate and gift tax treaties with roughly 15 countries, including Canada, the United Kingdom, Germany, France, and Japan.14Internal Revenue Service. Estate and Gift Tax Treaties (International) Treaties can change how assets are classified, which country has primary taxing rights, and the size of the credit. If you hold significant property in a treaty country, the treaty terms may override the default rules in your favor.
State Estate Taxes Are a Separate Bill
Federal estate tax is only part of the picture. About a dozen states and the District of Columbia impose their own estate taxes, often with exemption thresholds far below $15 million. Some start as low as $1 million; others come closer to the federal figure. A green card holder domiciled in one of these states can owe state estate tax even when the estate falls well under the federal filing threshold. Rules on what counts as a taxable estate and which deductions are available vary by state, so the state where you are domiciled at death adds its own layer of planning.
Filing the Estate Tax Return
When a return is required, the executor files IRS Form 706, reporting the fair market value of all worldwide assets as of the date of death.15Internal Revenue Service. Frequently Asked Questions on Estate Taxes The return needs formal appraisals for real estate, closely held businesses, and any other assets without a ready market price. If the surviving spouse is not a U.S. citizen, the return must disclose the QDOT election and the spouse’s citizenship status.
The return is due within nine months of the date of death.16Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns Form 4768 gives an automatic six-month extension for filing.17Internal Revenue Service. About Form 4768, Application for Extension of Time to File a Return and/or Pay US Estate Taxes The extension covers filing only. Estimated tax is still due at the original nine-month mark, and interest accrues on any unpaid balance from that date.
Missing the deadline without an extension triggers a failure-to-file penalty of 5% of the unpaid tax for each month the return is late, up to 25%.18Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax Interest on unpaid tax compounds daily at the federal short-term rate plus three percentage points. On an estate with real tax liability, a few months of delay can add tens of thousands in combined penalties and interest.