Gift tax implications from a non-US-resident to a US Resident

May 3, 2021 3:13 PM

I'm trying to find out the tax implications of a receiving a very large cash gift from my Canadian parents while I reside in the US. My understanding is that it is essentially tax free on my end because my parents are non-resident and the money has no US connection but that over $100K it has to be reported to the IRS by me when I file taxes but I am not entirely confident in my ability to read the 'IRSease' dialect. Is this correct?

Also any advice on cross border estate inheritance planning (inheriting from Canadian parents to American residents) would also be appreciated.

posted by srboisvert to Work & Money (9 answers total)

IANAL, but I have some experience with this exact scenario. Here's the deal:

As an American, you do not have to pay taxes on a cash gift of up to $15,000 from any single individual. If the money exceeds $15k, you have to file a gift tax return.
The fact that your Canadian parents are not in the U.S., and (I assume) are not American citizens doesn't matter. It doesn't matter who is giving you the money. What matters is the amount.
However, you can receive a $15k cash gift from your father, and another $15k cash gift from your mother, and neither gift is taxable because each gift is coming from a different person.

And, if, let's say, you had a spouse, your dad could give your spouse $15k, and your mom could give your spouse another $15k, and none of that money would be taxable, either, for a grand total of $60k untaxed gift money.

You can find more details on the matter here.
posted by cleverevans at 4:34 PM on May 3, 2021

Response by poster: As an American, you do not have to pay taxes on a cash gift of up to $15,000 from any single individual. If the money exceeds $15k, you have to file a gift tax return.

I'm not an American. I'm a resident alien. I should have mentioned that but I guess it got lost in my editing.
posted by srboisvert at 5:02 PM on May 3, 2021

As an American, you do not have to pay taxes on a cash gift of up to $15,000 from any single individual. If the money exceeds $15k, you have to file a gift tax return.

This is entirely backwards, as the link you posted notes. Recipients don't pay direct taxes on gifts or inheritances, though they'll owe taxes on appreciation of the gift or on income generated by the gift. Gift tax returns are filed by the donor, not the recipient.
posted by GCU Sweet and Full of Grace at 5:12 PM on May 3, 2021 [2 favorites]

Gift Tax is paid by the person who gives the gift, not the person who receives it.

Who pays the gift tax?
The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

Canada doesn't have a gift tax, but if your parents own property in the US that they are giving to you, they may be subject to it. There is also a lifetime gift tax exclusion on top of the $15,000 annual exclusion. That cap is currently 11.7 million USD, so you'll probably be ok. If you're getting more than that, a tax lawyer would be a good idea.
posted by Garm at 5:17 PM on May 3, 2021 [1 favorite]

I have been in this situation, and I have been advised that as the recipient you do not need to pay gift tax, file a gift tax return, or report this gift on your tax return. Unless the giver is under US tax jurisdiction in some way, they shouldn't have to either.
posted by goingonit at 5:29 PM on May 3, 2021

Best answer: Gift Tax is paid by the person who gives the gift, not the person who receives it.


I wonder if there's some way we could arrange to have this put in the sidebar. Few facts does Mefi so persistently get wrong.

However, you are correct that if you are receiving a gift of $100K or more from a foreign person, you must report it (not pay tax on it).
posted by praemunire at 6:18 PM on May 3, 2021 [2 favorites]

Best answer: If you are getting that large of a gift, and it's not all earmarked for immediate purchases or something, take a couple hundred bucks and have a licensed CPA do your taxes so you dont have to stress about not doing it correctly.
posted by ananci at 5:34 AM on May 4, 2021

Large bank transfers get some IRS attention, in case they're a sign of illegal activity, including tax fraud, so as much as it's fraught, the IRS reporting requirements are also a way of documenting legit transactions.
posted by theora55 at 7:22 AM on May 4, 2021

Just wanted to emphasize the point made above by prasmunire (and that you seem to have a handle on already) that you will need to report the gift. The penalties for failing to report the gift on time and in the right manner are significant. Find a CPA that has dealt with cross-border gifts.
posted by lex mercatoria at 2:45 PM on May 4, 2021