Inheritance Tax for Non-US Citizens: Exemption, Rate, and Form 706-NA

If you are not a US citizen and were never domiciled in the United States, your heirs face federal estate tax of up to 40% on the US-based assets you leave behind, with only about $60,000 effectively shielded from tax.¹ That is the short version of inheritance tax for non-US citizens, and it is a far harsher regime than the one that applies to Americans, who in 2026 get a $15 million exemption before any tax is owed.² The size of the gap surprises most families. The good news is that the rules leave real room to plan, especially around lifetime gifts, treaty relief, and trust structures for a non-citizen spouse.

Domiciled or Not: The Threshold Question

Everything turns on domicile. For estate tax purposes, the IRS treats a non-citizen the same as a US citizen if that person was domiciled in the United States at death, meaning they lived here with no definite present intention of leaving.³ This is not the same test the IRS uses for income tax residency. Someone domiciled in the US owes estate tax on their worldwide assets and gets the full citizen exemption.⁴

The IRS weighs the whole shape of a person’s life: where they banked, voted, held a driver’s license, spent most of their time, and kept their closest ties. Statements of intent in a will or an immigration file matter, but behavior that contradicts those statements will carry the day. Once US domicile is established, it continues until the person clearly establishes a new one somewhere else.³

Holding a green card does not automatically make someone domiciled here, but it makes the IRS’s argument easy. A lawful permanent resident who built a life in the country will almost certainly be treated as domiciled.³

A non-citizen who was never domiciled in the US is what the IRS calls a nonresident not a citizen, often shortened to NRND. The rest of this article is about that group, because that is where the harsh exemption applies.

Which of Your Assets the IRS Can Tax

For an NRND, only property with a US “situs” — treated as located in the United States — is subject to estate tax. The main taxable categories:

US real estate, including land, houses, and condominiums.⁴
Tangible personal property physically in the US at death: artwork, jewelry, vehicles, furniture.
Stock in US corporations. This one catches people out. Shares in any company organized under US law are US-situs property even if the account holding them sits in a foreign brokerage.⁵
Certain US debt obligations, including federal and state government bonds and notes issued by US persons.⁵

Several categories escape the tax entirely:

Deposits with a US bank, savings institution, or credit union.⁴
Life insurance proceeds on the life of a nonresident non-citizen.⁴
Most publicly traded bonds that qualify as portfolio debt under the tax code.

The stock rule is worth sitting with. An NRND living abroad who holds $2 million in US equity index funds through a foreign brokerage has a $2 million US-situs estate. The brokerage’s location does not help. The company’s country of organization is what counts.

The $60,000 Shelter and the 40% Rate

A US citizen dying in 2026 has a $15 million basic exclusion before any estate tax is owed.² An NRND gets a statutory credit of $13,000, which offsets the tax on roughly the first $60,000 of US-situs assets.¹ The $13,000 figure has not changed in decades and is not indexed for inflation.

The rate schedule is graduated, starting at 18% on the first $10,000 of taxable value and reaching 40% for taxable amounts above $1 million.² Because the exemption-equivalent is so low, even a moderate portfolio of US stock pushes the estate into the top bracket quickly.

NRNDs can deduct funeral costs, estate administration fees, and debts, but only in proportion to how much of the worldwide estate sits in the US. If US assets are 10% of the worldwide total, 10% of allowable deductions can be claimed. The executor has to report the worldwide estate value on Form 706-NA so the IRS can run that ratio.⁶

A simple illustration: an NRND dies in 2026 with $3 million in US corporate stock and $12 million in assets outside the United States. The US gross estate is $3 million. After the proportional deduction share (say $20,000 eligible), the taxable estate is $2,980,000. The tentative tax at graduated rates comes in around $1,140,800. Subtract the $13,000 credit and the bill is roughly $1,127,800 — more than a third of the US holdings.

Treaties That Can Shrink the Bill

The US has estate tax treaties with 15 countries: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, South Africa, Switzerland, and the United Kingdom.⁷ If the decedent was domiciled in one of these countries, the treaty can offer two forms of relief.

The more valuable one replaces the $13,000 statutory credit with a prorated share of the full citizen exemption. The formula multiplies the $15 million exclusion by the ratio of US assets to worldwide assets.¹ A UK-domiciled decedent whose US holdings are 20% of their worldwide estate would get a credit equivalent to 20% of $15 million, or $3 million. That outcome is in a different universe from the default $60,000 equivalent.

Some treaties also re-characterize certain assets as non-US property, pulling them out of the US estate entirely. The specific assets vary by treaty, so the text of the applicable agreement controls. For decedents domiciled in a country without a treaty — which includes most of the world — the statutory $13,000 credit is all the estate receives. Claiming any treaty benefit requires filing Form 706-NA and disclosing worldwide assets, so the relief is not automatic.

If Your Spouse Isn’t a US Citizen

A US citizen who leaves everything to a spouse pays zero estate tax under the unlimited marital deduction. That deduction disappears when the surviving spouse is not a US citizen, even if that spouse is a US resident. The reasoning Congress applied is that a non-citizen spouse could leave the country with the assets, placing them permanently beyond US tax reach.

The workaround is a Qualified Domestic Trust, or QDOT. If the deceased spouse’s assets pass into a properly structured QDOT, the estate qualifies for the marital deduction and the tax is deferred until the surviving spouse receives distributions of principal or dies.⁸

A QDOT has to meet three core requirements:

At least one trustee must be a US citizen or a domestic corporation.⁸
The US trustee must have authority to withhold estate tax on any principal distribution.
The executor must elect QDOT treatment on the estate tax return, and the election is irrevocable.

Principal distributions to the surviving spouse trigger estate tax as though that amount had been included in the deceased spouse’s estate. Income distributions pass through without triggering the QDOT tax, and hardship distributions are also exempt.⁸ Whatever remains when the surviving spouse dies is taxed as part of the original deceased spouse’s estate.

One escape valve: if the surviving non-citizen spouse becomes a US citizen before the estate tax return is due, assets can pass directly and qualify for the standard marital deduction without a QDOT.

Lifetime Gifts: The Main Planning Lever

The single most useful quirk in these rules is how differently the gift tax treats intangible property. Gifts of US-situs intangible property by a nonresident non-citizen — including stock in US corporations — are not subject to US gift tax at all.⁹ An NRND can give away shares of Apple, Google, or any other US company during their lifetime without paying a dollar of US gift tax.¹⁰ Hold the same shares until death and the IRS can take up to 40%.

Gifts of US real estate and tangible personal property located in the US are still subject to gift tax. The 2026 annual exclusion is $19,000 per recipient.¹¹ For gifts to a non-citizen spouse, the exclusion rises to $194,000 in 2026.¹²

For families with meaningful US stock holdings, the gift-versus-estate asymmetry on intangibles can justify restructuring an investment portfolio years before anyone expects it to matter.

The Basis Step-Up Trade-Off

Property included in a decedent’s gross estate generally gets a stepped-up basis equal to its fair market value at death.¹³ That rule applies to property inherited from NRNDs too: if US real estate or stock is included in the US taxable estate, heirs’ basis resets to the death-date value, erasing decades of unrealized gain.

This matters when weighing structures that keep US assets out of the gross estate, such as holding US real estate through a foreign corporation. Those arrangements can shrink or eliminate the estate tax, but they also forfeit the step-up. Heirs who later sell will owe capital gains tax on the full appreciation since the original purchase. For highly appreciated assets, the capital gains hit can rival the estate tax savings, so the math has to be run both ways before committing.

Filing Form 706-NA and the Nine-Month Clock

The executor must file Form 706-NA if the US-situs assets plus any adjusted taxable gifts exceed $60,000.⁶ Filing is also required whenever a treaty-based credit is claimed, even if the result is zero tax.

Both the return and the tax payment are due nine months after the date of death.⁶ An executor can file Form 4768 for an automatic six-month filing extension, but that extension does not extend the time to pay. A separate payment extension has to be requested through the same form.¹⁴ Missing the payment deadline triggers interest and penalties even when the filing extension is in place.

The return asks for the value of the worldwide estate, not just the US piece, because the global figure drives both the deduction ratio and any treaty-based credit. A certified death certificate and appraisals of US-situs assets have to be attached, with certified English translations of any foreign-language documents.

Late filing of Form 706-NA costs 5% of the unpaid tax per month, up to a 25% cap.¹⁵ A separate 0.5% monthly failure-to-pay penalty also runs. On a six-figure bill the combined damage adds up fast.

There is a practical enforcement mechanism as well. Before a US corporation or its transfer agent will release stock registered to a deceased non-citizen, it typically requires an IRS transfer certificate confirming that any estate tax has been paid or secured.¹⁶ Banks and custodians can be personally liable for releasing assets without one, so they wait for the IRS to sign off. For estates where US-situs assets fall under $60,000, no transfer certificate is required and the filing obligation does not kick in.

1
Office of the Law Revision Counsel. 26 USC 2102 – Credits Against Tax
2
Internal Revenue Service. Whats New – Estate and Gift Tax
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Internal Revenue Service. 4.25.4 International Estate and Gift Tax Examinations
4
Internal Revenue Service. Some Nonresidents with US Assets Must File Estate Tax Returns
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Office of the Law Revision Counsel. 26 US Code 2104 – Property Within the United States
6
Internal Revenue Service. Instructions for Form 706-NA (Rev. September 2025)
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Internal Revenue Service. Estate and Gift Tax Treaties (International)
8
Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
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Office of the Law Revision Counsel. 26 USC 2501 – Imposition of Tax
10
Internal Revenue Service. Gift Tax for Nonresidents Not Citizens of the United States
11
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
12
Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States
13
Office of the Law Revision Counsel. 26 US Code 1014 – Basis of Property Acquired from a Decedent
14
Internal Revenue Service. Instructions for Form 4768 (Rev. February 2020)
15
Internal Revenue Service. Failure to File Penalty
16
eCFR. 26 CFR 20.6325-1 – Release of Lien or Partial Discharge of Property; Transfer Certificates in Nonresident Estates