What Is the Section 2801 Tax on Gifts and Inheritances from Covered Expatriates?
Section 2801 imposes a special tax on U.S. citizens and residents who receive gifts or inheritances from covered expatriates. The tax rate equals the highest estate and gift tax rate in effect at the time of receipt (currently 40%), and it applies to the U.S. recipient, not the expatriate donor (IRS: Section 2801 – Imposition of Tax).
How Section 2801 works:
| Feature | Rule |
| Tax rate | 40% (the highest federal estate/gift tax rate) |
| Who pays | The U.S. recipient, not the expatriate |
| Applies to | Gifts and bequests from covered expatriates |
| Annual exclusion | The gift tax annual exclusion ($19,000 for 2025) applies |
| Charitable exception | Transfers to U.S. charities are exempt |
| Treaty override | Reduced or eliminated if an estate tax treaty applies |
Who is a “covered expatriate” for Section 2801 purposes:
- A U.S. citizen who renounced and met any of the three covered-expatriate tests (net worth $2M+, average tax $206K+, or failed compliance certification)
- A long-term green card holder who surrendered after 8 years and met any test
- The status is permanent; it does not expire after a certain number of years
What this means in practice:
- A covered expatriate parent who gives $100,000 to a U.S.-resident child triggers a potential $40,000 Section 2801 tax on the child (after the $19,000 annual exclusion)
- An inheritance from a covered expatriate to a U.S. beneficiary is subject to the same 40% rate
- Transfers through foreign trusts from covered expatriates are also covered
- The U.S. recipient reports the transfer and pays the tax (the form for reporting Section 2801 transfers has not yet been finalized by the IRS as of 2025, but the tax liability exists)
This tax is separate from Form 3520 reporting for foreign gifts. A gift from a covered expatriate may trigger both Section 2801 tax and Form 3520 disclosure.
For more, see our Exit Taxes guide.
Last updated on April 29, 2026
