U.S. Gift Tax for Americans Abroad: Guide to Giving and Receiving

According to the IRS, Americans must report foreign gifts exceeding $100,000, but here’s the relief: these gifts aren’t taxed. The U.S. gift tax system works differently than most countries, with separate reporting rules depending on whether you’re giving or receiving a gift.

Two Forms, Two Scenarios

For Americans living abroad, gift tax rules create confusion because two separate scenarios require different forms:

Your Situation	Form to File	When Required
You GIVE a gift (to anyone, anywhere)	Form 709	When you give more than $19,000 to one person in a year
You RECEIVE a gift (from a foreign person)	Form 3520	When you receive more than $100,000 from foreign individuals (refers to aggregate gifts during the tax year from foreign individuals or estates)

Mixing up these forms or missing filing requirements can trigger penalties up to 25% of the gift value.

In this guide, you’ll learn:

Exact dollar thresholds for 2025 and 2026
Which form applies to your situation
Step-by-step filing instructions
How to avoid costly penalties
Strategic planning to minimize reporting

Quick Reference: Gift Tax Thresholds at a Glance

When You GIVE a Gift (Form 709)

Gift Type	2025 Tax Year Limit	2026 Tax Year Limit	What This Means
Annual exclusion (per person)	$19,000	$19,000	Give this amount to unlimited recipients without filing
Married couple (combined)	$38,000	$38,000	Double the exclusion through gift splitting
Non-U.S. citizen spouse	$190,000	$194,000	Special higher limit for foreign spouses
Lifetime exemption (individual)	$13.99M	$15M	Total you can give over your lifetime tax-free
Lifetime exemption (married)	$27.98M	$30M	Combined exemption for couples

Pro Tip

The annual exclusion resets every January 1. You could give someone $19,000 on December 31, 2025, and another $19,000 on January 1, 2026, without ever filing Form 709.

Worried a foreign gift might trigger IRS reporting?

Large transfers from parents abroad, inheritances, or gifts you’ve given can require complex filings. We’ll walk you through thresholds, aggregation rules, and documentation so nothing is missed.

When You RECEIVE a Gift (Form 3520)

Gift Source	2025 Threshold	2026 Threshold	Must Report?
Foreign individual or estate	$100,000+	$100,000+	Yes
Foreign corporation/partnership	$20,116+	TBD*	Yes
U.S. person (even from abroad)	Any amount	Any amount	No
Covered expatriate	Over $19,000	Over $19,000	Yes + tax may apply

*Adjusted annually for inflation

Take Note

A “foreign person” means the donor’s citizenship status, not where the money came from. A U.S. citizen wiring money from London is NOT a foreign person.

Part 1: When You GIVE Gifts (Form 709)

Quick Answer: Do I Need to File Form 709?

File Form 709 if:

✓ You gave more than $19,000 to any one person in 2025 or 2026
✓ You gave more than $190,000/$194,000 to your non-U.S. citizen spouse
✓ You’re married and want to split gifts with your spouse (even under limits)

Don’t file Form 709 if:

✗ All your gifts were under $19,000 per person
✗ You only gave to your U.S. citizen spouse
✗ You paid tuition/medical bills directly to institutions
✗ You only gave to charities

What Is the U.S. Gift Tax?

The U.S. gift tax is a federal tax on transfers of money or property to another person when you don’t receive equal value in return. The person giving the gift is responsible for any tax owed and reporting requirements, not the recipient.

What Counts as a Gift	What’s NOT a Gift
Cash to family members	Business transactions at fair value
Property deeded to children	Paying someone for services
Stocks or bonds given to friends	Transfers between U.S. citizen spouses
Interest-free loans (difference is a gift)	Tuition paid directly to schools
Adding someone to your account	Medical bills paid directly to providers

Important

This applies to U.S. citizens and green card holders regardless of where they live. If you’re an American living abroad and give a substantial gift to anyone (whether in the U.S. or abroad), you follow the same gift tax rules as Americans living domestically.

The $19,000 Annual Exclusion: Your Free Pass

For 2025 and 2026, you can give up to $19,000 per person per year without needing to file Form 709.

Key Rules:

Rule	What It Means	Example
Per recipient	Give $19,000 to unlimited people	Give $19,000 to each of your 3 children = $57,000 total, no reporting
Per year	Resets January 1	Give $19,000 on Dec 31, 2025 + $19,000 on Jan 1, 2026 = OK
Per person	You and spouse each get $19,000	Married couple can give $38,000 to one person

Pro Tip

Strategic use of annual exclusions can transfer substantial wealth without ever filing Form 709. A married couple with 3 children could give away $114,000 per year ($38,000 × 3) with zero reporting

Gift Splitting for Married Couples

Example: Gift Splitting in Action

Michael and Sarah want to give their daughter $35,000 for a down payment.

Scenario	Michael Gives Alone	Michael + Sarah Split
Gift amount	$35,000	$35,000
Annual exclusion	$19,000	$19,000 each
Amount over exclusion	$16,000	$0
Form 709 required?	Yes	No*
Tax owed?	No (lifetime exemption)	No

*Gift splitting requires filing Form 709 to make the election, even when under limits

Special Rules for Non-U.S. Citizen Spouses

Gifts between U.S. citizen spouses are normally unlimited. However, if your spouse is not a U.S. citizen, different limits apply:

Tax Year	Annual Limit to Non-U.S. Citizen Spouse
2025	$190,000
2026	$194,000

Take Note: Gifts above these amounts require filing Form 709.

The Lifetime Gift Tax Exemption

Quick Facts:

Category	2025 Limit	2026 Limit
Individual lifetime exemption	$13.99 million	$15 million
Married couple (combined)	$27.98 million	$30 million
When tax actually owed	After exceeding lifetime limit	After exceeding lifetime limit
Tax rate if you exceed	18% to 40%	18% to 40%

Important

This lifetime exemption is unified with the estate tax exemption. When you make gifts exceeding the annual exclusion, you simply reduce your available lifetime exemption. You only owe actual gift tax after exhausting this entire lifetime amount.

Example: How the Lifetime Exemption Works

Patricia gives her son $250,000 in 2025 to start a business.

Step	Amount	Explanation
Total gift	$250,000	Full amount given
Annual exclusion	-$19,000	No reporting needed for this portion
Amount over exclusion	$231,000	Must report on Form 709
Tax owed?	$0	Still far below $13.99M lifetime limit
New lifetime exemption	$13.759M	Reduced from $13.99M

When Do I Actually Owe Gift Tax?

Very few people ever pay gift tax. You only owe gift tax if your cumulative gifts over your lifetime exceed:

$13.99 million in 2025
$15 million in 2026 (made permanent under One Big Beautiful Bill Act)

Important

If you exceed these amounts, gift tax rates range from 18% to 40% depending on the amount. But reaching this threshold means you’ve already given away millions tax-free.

Gifts That Never Require Form 709

Gift Type	Limit	Key Rule
To U.S. citizen spouse	Unlimited	No reporting ever
To qualified charities	Unlimited	Can deduct on tax return
Political contributions	Unlimited	To political organizations
Tuition payments	Unlimited	Must pay school directly
Medical expenses	Unlimited	Must pay provider directly
Under annual exclusion	$19,000 per person	Per recipient, per year

Important

For tuition and medical payments, you must pay the institution or provider directly. If you give money to the person and they pay, it’s a taxable gift subject to annual exclusion limits.

Real-World Example: Education Payments

James wants to help his niece with college expenses.

Option	Payment Method	Amount	Form 709 Required?
Option 1	Pays $50,000 directly to university	$50,000	No
Option 2	Gives niece $50,000, she pays university	$50,000	Yes (for $31,000 over limit)

Same money, different tax treatment based on how it’s paid.

How to File Form 709: U.S. Gift Tax Return

Form 709 is the U.S. Gift (and Generation-Skipping Transfer) Tax Return.

Filing at a Glance:

Detail	Information
When to file	April 15 (or June 15 for expats)
Extension available	Yes, until October 15
E-file option	No – must mail paper form
Filed with 1040?	No – filed separately
Tax typically owed	Usually $0 (lifetime exemption applies)

What You’ll Need:

Description of each gift
Date gift was made
Fair market value (appraisal for property)
Recipient’s name and relationship
Your cumulative lifetime gifts

Mailing Address:

Department of the Treasury
Internal Revenue Service Center
Kansas City, MO 64999

Pro Tip

Even when no tax is owed, Form 709 creates an official IRS record of the gift’s value. This can prevent future disputes about valuations, especially for property or business interests.

Common Gift Tax Scenarios for Expats (Giving Gifts)

Scenario 1: Helping Children Buy Property

Situation: Emily lives in France and wants to give each of her two children $100,000 to help with home purchases in the U.S.

Detail	Amount	Explanation
Total gifts	$200,000	$100,000 × 2 children
Annual exclusion	-$38,000	$19,000 × 2 children
Must report on Form 709	$162,000	Amount over exclusion
Tax owed	$0	Lifetime exemption applies
Remaining lifetime exemption	$13.828M	$13.99M – $162,000

Scenario 2: Gift to Foreign Parent

Situation: David lives in Japan and sends his mother in the Philippines $25,000 for medical expenses.

Payment Method	Form 709 Required?	Why
Paid directly to medical providers	No	Unlimited medical exclusion
Sent to his mother	Yes	$6,000 over $19,000 exclusion

Scenario 3: Family Member Starting a Business

Situation: Rebecca in Germany gives her nephew $150,000 to start a business in Canada.

Step	Amount	Action
Gift amount	$150,000	Full amount
Annual exclusion	-$19,000	Automatic
Amount to report	$131,000	Must file Form 709
Tax owed	$0	Lifetime exemption
Key point	n/a	Nephew’s location (Canada) doesn’t change Rebecca’s filing requirements

Part 2: When You RECEIVE Gifts (Form 3520)

Quick Answer: Do I Need to File Form 3520?

File Form 3520 if you received:

✓ More than $100,000 from a foreign individual or estate (refers to aggregate gifts during the tax year from foreign individuals or estates)
✓ More than $20,116 from a foreign corporation or partnership
✓ Multiple gifts from related foreign persons totaling over $100,000

Don’t file Form 3520 if:

✗ The gift came from a U.S. citizen or green card holder
✗ Total gifts from foreign individuals were under $100,000
✗ You’re giving a gift (that’s Form 709, not Form 3520)

What Is a Foreign Gift?

For U.S. tax purposes, a foreign gift is money or property you receive from a foreign person that you treat as a gift.

“Foreign Person” Includes:

✓ Foreign Person	✗ NOT Foreign Person
Nonresident alien individuals	U.S. citizens (even if living abroad)
Foreign corporations	Green card holders
Foreign partnerships	U.S. domestic trusts
Foreign estates	U.S. corporations
Foreign trusts	U.S. partnerships

Critical: The donor’s tax status determines whether a gift is “foreign,” not where the money came from.

Real-World Examples:

Situation	Is It a Foreign Gift?	Why?
Maria in Spain receives $150,000 from her U.S. citizen brother’s London bank	No	Brother is U.S. citizen
Tom in California receives $150,000 from his Canadian mother in Canada	Yes	Mother is nonresident alien
Sarah receives $120,000 from her green card holder father in Germany	No	Father is U.S. person

When Must I Report Receiving a Foreign Gift?

You must file Form 3520 based on these thresholds:

Source of Gift	2025 Threshold	2026 Threshold	Aggregate Rule
Foreign individual	$100,000+	$100,000+	Combine all gifts from same person
Foreign estate (inheritance)	$100,000+	$100,000+	Total from that estate
Foreign corporation	$20,116+	TBD*	Adjusted annually
Foreign partnership	$20,116+	TBD*	Adjusted annually

*Inflation-adjusted each year

Take Note

These thresholds apply to the total amount you receive during the tax year, not individual transfers.

For foreign individuals or estates, the $100,000 threshold applies to the aggregate amount from that foreign person, and includes amounts from related persons the IRS treats as a single source.

For foreign corporations or partnerships, the $20,116 threshold for 2025 applies to the aggregate amount received from all foreign entities during the year. The IRS does not use a “same source” rule for entities — you combine amounts from all foreign corporations and partnerships when determining whether you must file Form 3520.

The IRS aggregates gifts from related foreign persons to prevent people from avoiding reporting by splitting large gifts.

How Aggregation Works:

Example	Individual Amounts	Must Aggregate?	Total	File Form 3520?
Uncle + his wife + their child	$45K + $40K + $25K	Yes (related)	$110K	Yes
Uncle + unrelated friend	$50K + $50K	No (unrelated)	$100K each	No
Mother + Father	$60K + $50K	Yes (spouses)	$110K	Yes

Real-World Example: Related Party Aggregation

Kevin receives gifts from his Italian relatives:

Gift From	Relationship	Amount	Aggregate?
Uncle Mario	Uncle	$45,000	Yes
Aunt Lucia	Mario’s wife	$40,000	Yes
Cousin Francesca	Mario & Lucia’s daughter	$25,000	Yes
Total from related source		$110,000	Must file Form 3520

If Kevin received $50,000 from Uncle Mario and $50,000 from an unrelated foreign friend, he would NOT need to file Form 3520 because neither source individually exceeded $100,000.

Are Foreign Gifts Taxable?

Short answer: No. The U.S. does not tax recipients of gifts.

What	Taxable?	Why
The gift itself	No	Never taxed to recipient
Interest earned on gifted cash	Yes	Investment income
Dividends from gifted stocks	Yes	Investment income
Rental income from gifted property	Yes	Rental income
Capital gains when you sell gifted property	Yes	Gain on sale

Take Note

If the gift generates income after you receive it, that income IS taxable. Report it on your Form 1040.

Foreign Inheritances: Same Rules as Gifts

The IRS treats inheritances from foreign estates the same as gifts for reporting purposes.

You Inherit	Amount	Form 3520 Required?
Cash from grandmother in Scotland	£125,000 (~$160,000)	Yes
Property from uncle in France	€90,000 (~$95,000)	No (under $100K)
Business shares from aunt in Mexico	$250,000 value	Yes

How to File Form 3520 for Foreign Gifts

Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) – Part IV covers foreign gifts.

Filing at a Glance:

Detail	Information
When to file	April 15 (or June 15 for expats abroad)
Extension	October 15 (same as Form 1040 extension)
E-file option	No – must mail paper form
Filed with 1040?	No – filed separately
Tax owed	Never – informational only
Complete which section	Part IV only (skip trust sections)

Information You’ll Need:

☐ Donor’s name and address
☐ Date gift was received
☐ Description of property
☐ Fair market value in U.S. dollars
☐ Relationship to donor
☐ Exchange rate used (if applicable)

Mailing Address:

Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

Important: For inheritances, use the date you became the legal owner. If the death date and transfer date occur in different tax years, report at the death date to avoid late-filing penalties.

Common Foreign Gift Scenarios (Receiving Gifts)

Scenario 1: Wedding Gift from Foreign Family

Situation: Lisa (U.S. citizen in Texas) marries Pierre (French citizen). Pierre’s parents (French citizens in France) give them €110,000 (~$120,000) as a wedding gift.

Analysis	Conclusion
Are Pierre’s parents foreign persons?	Yes (French citizens, not U.S. persons)
Amount exceeds $100,000 threshold?	Yes ($120,000)
Must file Form 3520?	Yes – Lisa must file
Is gift taxable to Lisa?	No – never taxed

Scenario 2: Multiple Gifts from Same Foreign Source

Situation: Mark’s Australian parents (both foreign citizens) give him:

Month	Purpose	Amount
January	Car	$30,000
June	Business investment	$45,000
November	Home repairs	$35,000
Total		$110,000

Conclusion: Even though each gift was under $100,000, Mark must aggregate them (same source) and file Form 3520.

Scenario 3: Property Inherited from Abroad

Situation: Jennifer inherits an apartment in Italy worth €200,000 (~$220,000) from her aunt (Italian citizen).

Detail	Answer
Is this a foreign bequest?	Yes
Amount exceeds $100,000?	Yes ($220,000)
Must file Form 3520?	Yes
Taxable to Jennifer?	No (gift/inheritance itself)
If Jennifer sells later?	Yes (capital gains tax on gain)

Scenario 4: Below Threshold (No Filing Required)

Situation: Robert receives $75,000 from his uncle in Germany.

Analysis	Result
Amount below $100,000 threshold?	Yes ($75,000)
Form 3520 required?	No
Taxable?	No
Should keep documentation?	Yes (good practice)

Penalties for Failing to Report Gifts

The IRS takes gift reporting seriously. Penalties differ based on which form you failed to file.

Penalty Comparison at a Glance

Form	Base Penalty	Maximum	When It Applies
Form 709 (giving)	5% of tax due per month	25% of tax	When tax is actually owed (rare)
Form 3520 (receiving)	5% of gift value per month	25% of gift value	Always – even when no tax owed

Critical Difference: Form 3520 penalties apply to the gift amount itself, making them much more severe than Form 709 penalties.

Form 709 Penalties (For Givers)

Penalty Types:

Penalty Type	Rate	Maximum	Applies When
Late filing	5% per month	25%	Of the tax due
Late payment	0.5% per month	25%	Of unpaid tax
Interest charges	Variable rate	None	From due date

Pro Tip

If no tax is actually owed (because you’re under lifetime exemption), penalties may be minimal or waived if you can show reasonable cause for late filing.

Key Point: However, failing to file creates problems for future estate tax purposes because the IRS won’t have official records of gifts that used up portions of your lifetime exemption.

Form 3520 Penalties (For Recipients)

Form 3520 penalties are severe and apply even though no tax is owed.

How Penalties Calculate:

Months Late	Penalty Rate	Total Penalty
1 month	5%	5% of gift
2 months	5% × 2	10% of gift
3 months	5% × 3	15% of gift
4 months	5% × 4	20% of gift
5+ months	5% × 5	25% of gift (maximum)

Real Penalty Calculation Example:

Sarah received a $150,000 gift from her Japanese grandmother in January 2025 but forgot to file Form 3520 by April 15, 2026. The IRS discovers the oversight in August 2026 (4 months late).

Calculation	Amount
Gift value	$150,000
Penalty rate	5% per month
Months late	4 months
Total penalty	$30,000

Critical: This is a $30,000 penalty for simply failing to report a gift that wasn’t even taxable. The 5% monthly penalty quickly accumulates to the 25% maximum.

Additional Consequences:

⚠️ IRS may determine tax treatment of the gift (potentially treating it as taxable income)
⚠️ Increased audit risk
⚠️ Difficulties resolving the matter later

Reasonable Cause Exception

Both Form 709 and Form 3520 penalties may be waived if you can demonstrate “reasonable cause.”

What Qualifies as Reasonable Cause:

✓ May Qualify	✗ Unlikely to Qualify
Serious illness preventing filing	Forgot about the requirement
Natural disaster	Was too busy
Death in immediate family	Didn’t know (without good faith effort)
Filed as soon as you learned of requirement	Accountant didn’t tell me
Good faith effort to comply	Misunderstood the rules

Steps to Request Relief:

File the delinquent form immediately
Include a written statement explaining reasonable cause
Provide supporting documentation
Show you acted in good faith
Demonstrate you filed as soon as you became aware

Pro Tip

If you discover you should have filed Form 3520 in a previous year, file it immediately with a statement explaining the reasonable cause for the delay. This may help avoid or reduce penalties.

Special Rules and Exceptions

Gifts from U.S. Persons Living Abroad

A gift from a U.S. citizen or green card holder is NOT a foreign gift, regardless of circumstances.

Scenario	Foreign Gift?	Why
U.S. citizen in Singapore wires $200K from Singapore bank	No	Donor is U.S. person
Green card holder in France gives €150K	No	Donor is U.S. person
U.S. citizen gifts property located in Italy	No	Donor status matters, not property location

Example: Rachel (New York) receives $200,000 from her brother (U.S. citizen living in Singapore), wired from his Singapore bank account.

Question	Answer
Is this a foreign gift?	No – brother is U.S. citizen
Does Rachel file Form 3520?	No
Does her brother file Form 709?	Yes – if over $19,000 (he gave $200,000)

Key Takeaway: The donor’s citizenship/residency status determines whether it’s a foreign gift, not the location of the money or property.

Covered Expatriates: The Tax Exception

Critical exception: Gifts from covered expatriates ARE taxable to the recipient.

What Is a Covered Expatriate?

A former U.S. citizen or green card holder who:

Renounced their status, AND
Meets criteria (typically net worth over $2 million OR average annual income tax over ~$200,000 in five years before expatriation)

How It Works:

Detail	Amount/Rule
Annual exclusion	$19,000 (for 2025/2026)
Amount over exclusion	Subject to 40% tax
Who pays tax	The recipient (not the donor)
Form to use	Form 708 (not Form 3520)
Applies to gifts received	On or after June 17, 2008

Example: Covered Expatriate Gift

Your uncle renounced U.S. citizenship in 2020 and qualified as a covered expatriate. In 2025, he gives you $100,000.

Calculation	Amount	Explanation
Total gift	$100,000	Full amount
Annual exclusion	-$19,000	Not taxable
Taxable amount	$81,000	Subject to 40% tax
Tax you owe	$32,400	You pay, not your uncle

Important

This unusual rule exists to prevent wealthy individuals from avoiding U.S. estate and gift taxes by renouncing citizenship and then gifting money to U.S. relatives.

Gifts vs. Income: Important Distinctions

The IRS scrutinizes large transfers from foreign persons to ensure they’re truly gifts and not disguised compensation.

Red Flags vs. Clear Gifts:

Red Flags (Probably Income)	Clear Gifts
Regular payments over time	One-time or occasional transfers
Tied to services you provide	No services expected
From employer/client	From family members
Payments from foreign business you work for	Inheritance or family support
Tied to performance or deliverables	No strings attached

Example Comparison:

Situation	Is It a Gift?	Tax Treatment
Maria receives $50,000 from her aunt in Brazil for her wedding	Yes	Not taxable (but report on Form 3520 if over threshold)
Maria receives $5,000/month from her aunt’s Brazilian company while consulting	No	Taxable compensation on Form 1040

If Misclassified, You Could Owe:

✗ Income tax on the entire amount
✗ Self-employment tax (if applicable)
✗ Penalties for underreporting income

Student Support Payments

Many expat families question how to handle parents supporting students from abroad.

Payment Type	Form 3520 Required?	Counts Toward Threshold?
Tuition paid directly to school	No	No – unlimited exclusion
Medical paid directly to provider	No	No – unlimited exclusion
Money sent to student for living expenses	If over $100K	Yes
Money sent to student for any purpose	If over $100K	Yes

Example: Student Support

Hans (German citizen) whose daughter attends U.S. university each year:

Hans Pays	Form 3520 Required?	Why
$60,000 directly to university for tuition	No	Direct payment exclusion
$50,000 to daughter for rent/food/books	If total from Hans exceeds $100K	Counts toward threshold

If Hans’ daughter receives more than $100,000 total from him in a year (not counting direct tuition payments), she must file Form 3520.

Filing Multiple Gift Tax Forms

Some situations require filing both Form 709 and Form 3520.

Example: Multi-Generational Gifts

Linda (U.S. citizen, California) receives $200,000 from her mother in Canada (Canadian citizen). Linda then gives $150,000 to her daughter for a home down payment.

Linda’s Requirements:

Transaction	Form	Amount to Report	Why
Receiving from Canadian mother	Form 3520	$200,000	Foreign gift over $100K
Giving to daughter	Form 709	$131,000	Over $19,000 annual exclusion

Both forms due April 15 (or June 15 for expats).

Take Note: These are two separate transactions with different reporting requirements, even though the money flows through the same person.

Gift Tax Planning Strategies for Expats

Strategy 1: Annual Exclusion Gifts (Use It or Lose It)

The $19,000 annual exclusion resets each January 1. Strategic use can transfer substantial wealth without filing Form 709.

Multi-Year Gifting Example:

Gregory wants to give his three children $300,000 total. Rather than triggering Form 709:

Year	Amount Per Child	Total Given	Form 709 Required?
Year 1	$19,000 × 3	$57,000	No
Year 2	$19,000 × 3	$57,000	No
Year 3	$19,000 × 3	$57,000	No
Years 4-5	Remaining amounts	Balance	Depends on amounts
Total Over 5 Years		$300,000	Minimal reporting

This minimizes Form 709 filing and preserves more of his lifetime exemption for larger future gifts or estate planning.

Strategy 2: Gift Splitting for Maximum Benefit

Married couples can effectively double the annual exclusion through gift splitting.

Comparison:

Scenario	Gift Amount	Form 709 Required?	Amount to Report
Monica (single) gives nephew $35,000	$35,000	Yes	$16,000 over limit
Monica (married) + spouse split gift	$35,000	Yes*	$0 over limit

*Filing required to elect gift splitting, even when under limits

Even when no tax is owed, gift splitting requires filing Form 709 to make the election.

Strategy 3: Direct Payment Strategy

For education and medical expenses, always pay providers directly when possible.

Impact Comparison:

Strategy	Direct to Institution	Given to Student
Amount	$100,000 tuition	$100,000 to student
Annual exclusion used	$0	$19,000
Amount over exclusion	$0	$81,000
Form 709 required	No	Yes
Limit	Unlimited	Subject to lifetime exemption

Optimal Approach:

Pay directly to institution:

✓ No dollar limit
✓ Doesn’t count against annual exclusion
✓ Doesn’t count against lifetime exemption
✓ No Form 709 required

Give money to individual:

✗ Counts toward $19,000 annual exclusion
✗ Excess reduces lifetime exemption
✗ Form 709 required if over $19,000

Strategy 4: Cross-Border Considerations

Moving Between Countries:

Consideration	Key Point
U.S. citizenship	Gift tax rules follow you worldwide
Residence doesn’t matter	Living abroad doesn’t change obligations
Foreign gift reporting	Applies regardless of where you live
Other countries	May have their own gift tax systems

Dual Citizenship Situations:

If you have dual U.S./foreign citizenship:

✓ U.S. gift tax rules still apply to you
✓ You may have obligations in your other country
✓ Consult tax professionals in both countries
✓ Plan timing of large gifts carefully

Common Gift Tax Mistakes to Avoid

Mistake	❌ Wrong Assumption	✓ Right Understanding
1. Foreign gift definition	“My dad sent money from London, so it’s a foreign gift”	If dad is a U.S. citizen or green card holder, it’s NOT a foreign gift (donor status matters, not location)
2. Tax on receiving	“I received $150,000 from France, so I’ll owe gift tax”	Recipients never owe U.S. gift tax (only Form 3520 reporting, no tax)
3. Failing to aggregate	“I got $60K from uncle and $50K from aunt in Japan. Neither exceeds $100K, so no filing”	Must aggregate if related ($110K total exceeds threshold → file Form 3520)
4. No Form 709 if no tax	“I gave $50K but won’t owe tax due to lifetime exemption, so I don’t need to file”	Must file Form 709 to track lifetime exemption usage, even if $0 tax owed
5. Gift splitting without filing	“We each gave $15K ($30K total), we’re under $19K each, no filing”	Gift splitting requires filing Form 709 to make the election
6. Confusing FBAR with Form 3520	“I reported my foreign account on FBAR, so I don’t need Form 3520”	Different purposes: FBAR reports accounts; Form 3520 reports gifts received

How Greenback Can Help

Gift tax reporting for Americans abroad involves multiple forms, complex rules, and severe penalties for mistakes.

What We Do:

Service	Details
Form 709 Preparation	For gifts you’ve made over $19,000
Form 3520 Preparation	For foreign gifts you’ve received over $100,000
Delinquent Filing	Past years with reasonable cause explanations
Gift Tax Planning	Strategies for your unique situation
Current + Prior Years	Both current and back-year reporting

Why Choose Greenback:

✓ Helped over 23,000+ expats file correctly
✓ 4.9 star average across 1,200+ TrustPilot reviews
✓ 15+ years of expat tax expertise
✓ Avoid costly 25% penalties
✓ Peace of mind knowing forms are filed right

Our Expertise:

We understand:

When Form 709 vs. Form 3520 applies
How to calculate aggregate gifts from related foreign persons
Strategies to maximize annual exclusions
How to properly document gifts for IRS compliance
Reasonable cause arguments for missed filings

If you’re ready to be matched with a Greenback accountant, click the Get Started button below. For general questions on US expat taxes or working with Greenback, contact our Customer Champions.

Work with an expert who understands expat gift rules.

We prepare Forms 3520 and 709, handle delinquent filings with reasonable cause, and build strategies to keep your gifting tax-efficient. Your return will be complete, accurate, and fully compliant.

The information provided in this article is for general guidance only and should not be considered legal or tax advice. Tax laws change frequently, and individual circumstances vary. Always consult with a qualified tax professional before making decisions about your tax situation.

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