Non-Resident Alien Estate Tax: Rates, Exemptions, and Form 706-NA

The United States imposes estate tax on a non-resident alien’s US-situated property above a $60,000 exemption, at graduated rates that top out at 40%. The non-resident alien estate tax reaches real estate on US soil, tangible items physically present in the country, and stock in US corporations, but ignores the rest of the decedent’s worldwide wealth. The executor files Form 706-NA within nine months of death if US situs assets exceed $60,000, even when deductions wipe out the tax.

Who Counts as a Non-Resident Alien

For estate tax, the US uses domicile, not the day-counting residency tests from the income tax. A person is domiciled here if they live in the country with the intent to remain indefinitely. A long stay for a defined purpose does not create domicile.¹

The IRS looks at where family lives, where vehicles are registered, where a will was executed, voter registration, visa type, and the location of primary bank and brokerage accounts. No single factor controls. The analysis is holistic, which makes it both harder to predict and more open to dispute than the mechanical income-tax rules.

Green card status and meeting the Substantial Presence Test for income tax do not automatically establish estate tax domicile. These frameworks are separate.² Visa category can also shape capacity to form intent. Holders of B-1, B-2, F, M, J, and E visas generally cannot establish domicile, because those categories require intent to depart. Holders of G-4 visas and certain diplomatic categories (A-1, A-2) can form domiciliary intent, because their terms do not restrict length of stay or require maintaining a foreign residence.

The stakes of this call are enormous. If the IRS concludes an NRA was actually domiciled here, the $60,000 exemption disappears and the entire worldwide estate becomes taxable, like a citizen’s.¹

Which Assets the US Taxes

The tax reaches only property with a US “situs.” Everything else in the worldwide estate is ignored. US situs property includes:

Real property physically located in the US, whether land, residential, or commercial.
Tangible personal property present in the country at death: jewelry, artwork, vehicles, furniture. The location of the item controls, not the owner’s.
Stock in US corporations, regardless of where the certificates are held or whether the shares were bought through a foreign broker.
Certain US debt obligations, unless they qualify for the portfolio debt exclusion below.

Several assets that look like they should be US property are excluded by rule. Life insurance proceeds on the NRA’s life are treated as non-US property, regardless of the insurer. Deposits with US banks, savings institutions, or insurance companies are excluded, as long as they are not connected with a US trade or business. Bonds and notes whose interest qualifies as portfolio interest under the income tax rules are excluded, which covers most widely traded US government and corporate bonds. Shares of a company not incorporated in the US are non-situs property, even if that foreign company owns substantial US assets or trades on a US exchange.¹ Works of art imported solely for public exhibition, loaned to a qualifying museum, and on display or in transit at death are also excluded.³

Partnership Interests, Trusts, and LLCs

Partnership situs is one of the least settled questions in this area. The IRS has long treated a partnership interest as an intangible asset whose situs follows where the partnership does business, so an interest in a US partnership operating here is treated as US situs. The law is unsettled enough that NRAs with such interests should plan on the asset being taxable.

US-situated assets held in a trust can be pulled into the taxable estate if the NRA kept certain powers during life, including a retained life estate, a power to revoke, or transfers made within three years of death that would trigger inclusion for US persons.⁴

A domestic LLC that holds US real estate is generally disregarded for estate tax purposes, so the IRS looks through to the real property itself. Placing the same real estate under a foreign corporation flips the analysis: the NRA owns foreign corporate stock, which is not US situs. This structural difference drives one of the most common planning strategies for NRAs buying US real estate, but it carries income tax and FIRPTA tradeoffs that need separate review.

What the Tax Actually Costs

The $60,000 Exemption and Graduated Rates

NRAs receive a unified credit of $13,000, which shelters the first $60,000 of US situs property. A net taxable estate at or below $60,000 owes no tax.⁵ By contrast, US citizens and domiciliaries get a $15 million basic exclusion amount for 2026.⁶ The NRA figure is not indexed for inflation and has sat at $60,000 for decades.

Everything above the exemption is taxed on the same graduated schedule used for citizen estates, starting at 18% and reaching 40% on amounts over $1 million.⁷ An NRA with $2 million of US situs property and no treaty benefits can face an estate tax bill above $700,000.

Deductions and Proration

The executor subtracts allowable deductions from the gross US situs estate to reach the net taxable figure. These include funeral costs, administration expenses, debts, and certain losses, but most are prorated by the ratio of US situs assets to the worldwide estate. If US assets are 10% of global wealth, only 10% of those costs may be deducted.⁸

Two deductions escape proration. Mortgages and debts specifically secured by US real property come off in full against that property’s value. Bequests to qualifying US charities are fully deductible. To calculate the ratio, the executor still has to document the entire worldwide estate.

Marital Transfers and QDOTs

An NRA estate can claim the unlimited marital deduction on US situs property only if the surviving spouse is a US citizen. When the spouse is not a citizen, the marital deduction is denied unless the assets pass through a Qualified Domestic Trust.⁹

A QDOT has to meet three requirements. At least one trustee must be a US citizen or domestic corporation. That US trustee must have the right to withhold estate tax from any distribution of principal. And the executor must affirmatively elect QDOT treatment on the return; the election is not automatic.⁹

Distributions of principal from a QDOT trigger estate tax when they occur, and anything remaining in the trust at the surviving spouse’s death is also taxed. The effect is deferral rather than elimination, but skipping the QDOT means losing the marital deduction entirely on US situs assets.

How Treaties Change the Math

The US has bilateral estate tax treaties with eighteen countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom. For citizens of a treaty partner, these treaties override the domestic rules and can sharply reduce the tax.

Treaties help in two ways. Some reclassify certain US assets as non-situs for citizens of the treaty country, which can remove US corporate stock from the taxable estate entirely. Most also replace the $13,000 unified credit with a prorated share of the full US citizen credit, based on the ratio of US to worldwide estate.

That prorated credit can be substantial. If a German citizen’s US situs assets are 20% of worldwide wealth, the prorated exemption would shelter roughly $3 million of US property from tax for 2026, against the $15 million citizen exemption.⁶ Without a treaty, the same estate would have only the $60,000 exemption. The estate claims treaty benefits on Form 706-NA with an attached statement identifying the specific provisions invoked.⁵

Lifetime Gifts Follow Different, More Favorable Rules

The US gift tax for NRAs reaches only transfers of real property and tangible personal property located in the United States. Gifts of US-situated intangibles are not taxable. An NRA can give away shares of US corporations during life without any US gift tax.¹⁰

The same stock held at death would be subject to estate tax at rates up to 40%. That gap is the clearest planning opportunity in the system: transferring US corporate stock during life removes it from the taxable estate. The opportunity does not reach US real estate or tangible personal property, which are taxable whether given away or held until death.

For 2026, the annual gift tax exclusion is $19,000 per recipient. Gifts to a non-citizen spouse receive a higher annual exclusion of $194,000.¹¹ NRAs do not get a lifetime gift tax exemption equivalent to the $15 million citizen exclusion, so taxable gifts of US real property or tangible assets above the annual exclusion trigger gift tax immediately.

Filing Form 706-NA

The executor must file Form 706-NA when the value of US situs assets, combined with any prior taxable gifts, exceeds $60,000. The filing obligation exists even if deductions and the unified credit zero out the tax.⁵

The return is due nine months after the date of death. A six-month filing extension is available on Form 4768, but it does not extend time to pay. The full tax is due at the nine-month mark regardless.¹²

The return asks for the decedent’s Social Security number, ITIN (if one was previously used), or an IRS-assigned number. If none exists, line 2 is left blank and the IRS assigns a number during processing. The executor also has to provide documentation proving authority to act, such as a certified copy of the will or a court appointment order.¹²

Payment can be made by check, money order, or EFTPS. The US government holds a lien on all US situs assets until the estate tax is satisfied, which can freeze real estate transactions and brokerage transfers until the IRS confirms the obligation is resolved.

Penalties for Late Filing and Undervaluation

Missing the deadline brings a penalty of 5% of unpaid tax per month or partial month, capped at 25%.¹³ A separate late-payment penalty runs at 0.5% per month, also capped at 25%. When both apply at once, the failure-to-file penalty is reduced by the failure-to-pay amount, so the combined first-five-months rate stays at 5% per month. Interest also runs on unpaid balances at 7% annually (as of early 2026), compounding daily.¹⁴

Undervaluing assets on the return brings its own risk. If a reported value is 65% or less of the correct value, the IRS imposes a 20% accuracy penalty on the resulting underpayment, provided the underpayment exceeds $5,000. If the reported value is 40% or less of correct, the penalty doubles to 40%.¹⁵ Real estate appraisals are where this comes up most often. A qualified, independent appraiser with US market experience is worth the cost.

Clearing the Lien to Transfer Assets

Until the IRS is satisfied the tax is paid, a statutory lien attaches to all US situs assets. Clearing it depends on whether the estate has a US-based executor.

When the executor is appointed and acting in the United States, the estate applies for a discharge of the lien on specific property using Form 4422. The application should be submitted at least 45 days before any planned closing or transfer.¹⁶ Required attachments include a legal description, the sales contract, an appraisal, and a copy of the filed Form 706-NA (or a draft if the return has not yet gone in).

When no executor is appointed in the United States, the estate needs a transfer certificate instead. The IRS issues one only after finishing its review and confirming the tax has been paid or provided for. Processing runs six to nine months from the time the IRS has all necessary documentation.¹⁷ If Form 706-NA was required, the estate submits a copy. If no return was required because US assets fell below $60,000, the estate submits the death certificate, copies of the will, foreign death tax returns, and an affidavit listing all US assets and values. Estates holding US real property should start this process immediately after filing, not after finding a buyer.

A sale of US real property by the estate also triggers FIRPTA withholding by the buyer, generally 15% of the gross sale price.¹⁸ This withholding is a prepayment of income tax on the gain, not the estate tax. The estate can apply for a reduced withholding amount by filing Form 8288-B before closing if the actual liability will be less. FIRPTA runs on a separate track from the estate tax lien, so an estate selling US real estate often has to work both systems at once.

Generation-Skipping Transfer Tax

The generation-skipping transfer tax applies to NRAs, but only to the extent the underlying transfer is already subject to US estate or gift tax. A direct skip to a grandchild of US situs property at death triggers GST tax on top of the estate tax, at a flat 40% rate.¹⁹

NRAs receive a GST exemption, though its exact 2026 amount depends on whether the statutory base of $1 million or an indexed figure applies. For US citizens and domiciliaries, the GST exemption for 2026 is $15 million, matching the basic exclusion amount.²⁰ NRAs planning to leave US situs property to grandchildren, or in trusts that skip a generation, should account for this additional layer. It is reported on the same Form 706-NA.

1
Internal Revenue Service. Some Nonresidents with U.S. Assets Must File Estate Tax Returns
2
Internal Revenue Service. Determining an Individual’s Tax Residency Status
3
eCFR. 26 CFR 20.2105-1 – Estates of Nonresidents Not Citizens
4
Office of the Law Revision Counsel. 26 USC 2104 – Property Within the United States
5
Internal Revenue Service. Instructions for Form 706-NA (09/2025)
6
Internal Revenue Service. What’s New – Estate and Gift Tax
7
GovInfo. 26 USC 2101 – Tax Imposed
8
Office of the Law Revision Counsel. 26 USC 2106 – Taxable Estate
9
Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
10
Internal Revenue Service. Gift Tax for Nonresidents Not Citizens of the United States
11
Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States
12
Internal Revenue Service. Instructions for Form 706-NA
13
Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
14
Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
15
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
16
Internal Revenue Service. Form 4422 – Application for Certificate Discharging Property Subject to Estate Tax Lien
17
Internal Revenue Service. Transfer Certificate Filing Requirements for the Estates of Nonresidents Not Citizens of the United States
18
Internal Revenue Service. FIRPTA Withholding
19
eCFR. 26 CFR 26.2663-2 – Application of Chapter 13 to Transfers by Nonresidents Not Citizens of the United States
20
Congress.gov. The Generation-Skipping Transfer Tax (GSTT)