U.S. Estate Tax Implications for Non-Citizens and Residents
Under current U.S. tax law, the Internal Revenue Service (IRS)—part of the U.S. Department of the Treasury—applies different estate tax rules based on a person’s immigration status, residency for tax purposes, and marital status. These distinctions significantly affect the applicable estate tax exemption amount and the scope of taxable assets.
Estate Tax Exemption Amounts (as of Summer 2023)
- U.S. Citizens and Lawful Permanent Residents:
- Individual exemption: $12,920,000
- Married couple exemption: $25,840,000
- Non-Citizens / Non-Residents:
- Basic exemption: $60,000
⚠️ Important: Tax laws are subject to change. For the most accurate and current exemption amounts, consult the IRS or a qualified tax professional.
Scope of Taxable Assets
- The estate tax applies only to U.S.-situs assets—that is, assets located or held within the United States.
- For non-resident non-citizens, only U.S.-based assets are subject to estate taxation.
- U.S. citizens and residents, on the other hand, are generally taxed on their worldwide assets for estate tax purposes.
Who Is Considered a “Resident” for Estate Tax Purposes?
The IRS defines residency for estate tax purposes differently from income tax residency. An individual may be treated as a U.S. resident for estate tax purposes if they meet the substantial presence test, which examines the number of days spent in the U.S. over a three-year period.
Substantial Presence Test Overview:
- The test includes:
- All days present in the current year;
- 1/3 of the days present in the previous year;
- 1/6 of the days present in the year before that.
- If the total exceeds 183 days, the individual may be deemed a U.S. resident for estate tax purposes.
⚠️ Residency determinations are fact-specific. Exceptions and nuances may apply, including treaty provisions and domicile-based factors.
Why This Matters
Your residency classification can have a major impact on estate planning. U.S. citizens and tax residents benefit from significantly higher estate tax exemptions compared to non-resident non-citizens. Understanding your status and how the IRS will treat your estate can help you make informed decisions regarding:
- U.S.-based real estate and investment holdings;
- Gifting strategies during your lifetime;
- Estate planning structures such as trusts;
- Spousal transfers and applicable tax treaties.
Recommendation
U.S. estate tax rules—especially for non-citizens and cross-border estates—are complex. If you’re unsure of your residency status for estate tax purposes, or how U.S. tax law may apply to your estate plan, it is strongly recommended that you consult with a qualified tax attorney or estate planning professional who can evaluate your specific circumstances.
Last Revision: March 2025.