What are the U.S. gift tax rules for citizens, residents, and nonresidents? (2024)

U.S. citizens and residents are subject to a maximum rate of 40% with exemption of $5 million indexed for inflation. Nonresidents are subject to the same tax rates, but with exemption of $60,000 for transfers at death only. Sections 6018(a)(2); 2501(a)(1). Below is the table for computing the gift tax.

U.S. citizens and residents are subject to a maximum rate of 40% with exemption of $5 million indexed for inflation.
Nonresidents are subject to same tax rates, but with exemption of $60,000 for transfers at death only.

Column A	Column B	Column C	Column D
Taxable amount over	Taxable amount not over—	Tax on amount in Column A	Rate of tax on excess over amount in Column A
– – – – –	$10,000	– – – – –	18%
$10,000	20,000	$1,800	20%
20,000	40,000	3,800	22%
40,000	60,000	8,200	24%
60,000	80,000	13,000	26%
80,000	100,000	18,200	28%
100,000	150,000	23,800	30%
150,000	250,000	38,800	32%
250,000	500,000	70,800	34%
500,000	750,000	155,800	37%
750,000	1,000,000	248,300	39%
1,000,000	– – – – –	345,800	40%

The tax applies to all transfers by gift of property, wherever situated, by an individual who is a citizen or resident of the United States, to the extent the value of the transfers exceeds the amount of the exclusions authorized by section 2503 (unified credit against gift tax) and the deductions authorized under section 2522 (charitable and similar gifts) and 2523 (gift to spouse). Section 2501(a)(1); Treas. Reg. §25.2501-1(a)(1).

Example. Tom is a U.S. citizen and lives in Hong Kong. Tom transfers legal title to his apartment in Hong Kong to his brother. Although the property is located outside the United States, the gift tax applies to this transfer because Tom is a citizen. The same result applies if Tom is not a U.S. citizen but rather a resident of the United States (Tom lives in California).

A resident is an individual who has his domicile in the United States at the time of the gift. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of moving therefrom. Treas. Reg. §25.2501-1(b). An individual can be a resident for income tax purposes (e.g., green card holder or individual who passes the substantial presence test) but not a domiciled for gift tax purposes.

Example. Tom, who is originally from Australia, lives with his wife and two children in Cupertino, California. Tom is a resident for gift tax purposes because his domicile is in the United States. If Tom makes a gift of an apartment located in Australia, the transaction is subject to the gift tax.

If you are a U.S. citizen or resident of the United States, contact competent tax counsel who can explain the planning opportunities that may exist with respect to gifting property.

What are the U.S. gift tax rules for nonresidents not a citizen of the United States?

Are you a non-U.S. citizen who lives in a foreign country and you plan to make a gift of property located in the United States? You may be surprised to learn that the U.S gift tax rules apply to you, even though you are not a U.S. citizen.

If a gift is made by a nonresident not a citizen of the United States who was not an expatriate, the gift tax applies only to the transfer of real property and tangible personal property situated in the United States at the time of the transfer. Treas. Reg. §25.2511-3.

The gift tax does not apply to any transfer by gift of intangible property by a nonresident not a citizen of the United States (whether or not he was engaged in business in the United States), unless the donor is an expatriate and certain other rules apply. Section 2501(a)(2); Treas. Reg. §25.2501-1(a)(3).

Example. Chris is not a U.S. citizen, and lives and works in Beijing, China. Chris transferred legal title of his house in San Francisco, California to his daughter, Susi, who is attending school at the University of San Francisco. The gift tax applies because this is a transfer of real property situated in the United States, even though Chris is a nonresident and not a citizen of the United States.

Example. Tom is a nonresident not a citizen, and he transfers money on deposit in an American bank to his daughter, who lives in San Francisco. Money is treated as tangible personal property and is subject to gift tax.

Citizen or Resident of the United States	Nonresident Not Citizen of the United States
The tax applies to all transfers by gift of property, wherever situated.	The gift tax applies only to the transfer of real property and tangible personal property situated in the United States.
A resident is an individual who has his domicile in the United States at the time of the gift.	The gift tax does not apply to any transfer by gift of intangible property (e.g,. stocks and bonds) by a nonresident not a citizen of the United States unless the donor is an expatriate and certain other rules apply.
Annual exclusion of $14,000 per year per donee	Annual exclusion of $14,000 per year per donee
There is an unlimited marital deduction for transfers to a U.S. citizen spouse.	A gift to a noncitizen spouse is not eligible for the unlimited marital deduction. However, gifts to noncitizen spouses are eligible for an increased annual exclusion ($148,000 for 2016).
Subject to a maximum gift tax rate of 40% with exemption of $5 million indexed for inflation.	Subject to same gift tax rates, but with exemption of $60,000 for transfers at death only.

Individuals with gift tax issues should contact competent tax counsel, who can explain the planning opportunities that may exist with respect to the transfer of property by gift.

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