Foreign inheritance tax: US reporting requirements (2026)

Do you pay tax on inheritance from overseas? No federal income tax on the inheritance itself; Form 3520 may still be required; FBAR/Form 8938 may apply; later income is taxable.

Receiving an inheritance from abroad can feel straightforward until US reporting rules enter the picture. The key point for 2025 tax-year filings in 2026 is that US persons – including US citizens, resident aliens, and certain domestic entities – may have to report a foreign inheritance even when no US income tax is due on the inheritance itself.

The most common mistake is treating “not taxable” as “not reportable.” The IRS rules on foreign inheritance separate those two ideas: the inherited cash or property may be excluded from income, while Form 3520, FBAR, Form 8938, and other disclosures can still apply.

Taxes for Expats helps US expats and international taxpayers sort foreign inheritance reporting before penalties become the main issue. Review our Form 3520 filing guide if you already know the inheritance crossed the $100,000 threshold.

Do I have to pay US tax on foreign inheritances?

A foreign inheritance is generally not taxable income for US federal income tax purposes in 2025, but the income generated after you receive it is taxable. Interest, dividends, rent, business income, PFIC distributions, and capital gains from inherited foreign assets may need to be reported on Form 1040 and related schedules.

Is a foreign inheritance taxable in the US? The inheritance itself is usually excluded from income, but inherited assets can create taxable income later. That distinction matters because US tax on foreign inheritance often starts after receipt, not on the date the estate distributes the asset.

The inheritance itself is usually not income, but income earned after receipt can be taxable from day 1.

 

Based on our client scenario at TFX: a US citizen in Portugal inherited $250,000 from a nonresident alien parent in 2025. The $250,000 was not federal taxable income, but $3,200 of bank interest earned after receipt was taxable on the 2025 Form 1040.

Inherited foreign real estate can also create a US capital gains tax when sold. See our guide to capital gains tax on foreign property for the rules that apply after you own the inherited property.

Do I have to report a foreign inheritance?

You generally must report a foreign inheritance on Form 3520 if you received more than $100,000 from a nonresident alien individual or foreign estate in 2025. Gifts from foreign corporations or foreign partnerships use a much lower threshold: $20,116 for 2025 and $20,573 for 2026.

Foreign inheritance tax US reporting is mostly about disclosure, not paying tax on the inherited amount. Form 3520 tells the IRS about certain large foreign gifts and bequests, while FBAR and Form 8938 can apply if inherited money or assets remain in foreign financial accounts.

The following 3 reporting examples show how the $100,000 threshold works for 2025:

• $80,000 from one foreign parent: no Form 3520 Part IV solely because of that inheritance, assuming there are no related gifts that push the total over $100,000.
• $150,000 from a foreign estate: Form 3520 Part IV is generally required for 2025 because the total exceeds $100,000.
• $90,000 cash plus $20,000 from a related foreign estate: Form 3520 is generally required because related foreign gifts and bequests are aggregated.

Based on our client scenario at TFX: a US taxpayer received $60,000 from a foreign mother and $45,000 from a foreign estate related to that same family in 2025. The combined $105,000 exceeded the $100,000 threshold, so Form 3520 Part IV was required.

 

 

If the inherited money stays in a foreign account, review our guide to foreign assets disclosure rules. IRS reporting and FinCEN reporting can apply even when the inheritance itself is not taxable.

Do I have to report inheritance on my taxes?

You do not report every foreign inheritance as taxable income on Form 1040, but you may need 1 or more disclosure forms. The main 2025 thresholds are $100,000 for Form 3520 foreign individual or estate gifts, $10,000 for FBAR foreign accounts, and Form 8938 thresholds that start at $50,000 for certain US-resident filers.

Do you have to pay taxes on inheritance from another country? Usually not on the inherited principal. The reporting issue depends on the source, amount, account location, and what the asset earns after you receive it.

The fastest decision rule is: no income tax on most inheritances, but disclosure can begin at $10,000, $50,000, or $100,000, depending on the form.

Which forms do I need to submit?

Most foreign inheritance cases start with 4 possible filings: Form 3520, FBAR, Form 8938, and Schedule B. Form 3520 is filed separately from Form 1040, while Form 8938 is attached to Form 1040 when required.

Foreign inheritance reporting forms are triggered by different facts, so Form 3520 does not replace FBAR, and FBAR does not replace Form 8938.

 

A foreign inheritance can trigger more than 1 form in the same tax year. Read our comparison of FBAR vs. Form 8938 before assuming one filing covers the other.

Form 3520

Form 3520 is generally required when a US person receives more than $100,000 in gifts or bequests from a nonresident alien individual or foreign estate during 2025. It is not attached to Form 1040; it is filed separately with the IRS.

Part IV is the main Form 3520 section for foreign gifts and bequests. Foreign trust distributions belong in Part III, not Part IV, which is why classifying the inheritance source correctly matters before filing.

The following 6 details are usually needed for Form 3520 Part IV:

• Date the inheritance or gift was received
• Description of the property or cash received
• Fair market value in US dollars
• Donor or estate category, such as foreign individual or foreign estate
• Country connected to the donor, estate, or asset
• Each gift or bequest over $5,000, once the $100,000 threshold is crossed

Form 3520 for a 2025 foreign inheritance is generally due April 15, 2026. Qualifying US taxpayers living abroad generally have until June 15, 2026, and Form 4868 can extend the deadline to October 15, 2026.

See our guide to Form 3520 late-filing penalty abatement if you crossed the threshold in an earlier year and did not file.

What if I received a foreign inheritance late and didn’t file Form 3520?

A late Form 3520 for a foreign gift or bequest can carry a penalty of 5% per month, up to 25% of the reportable amount, unless the taxpayer can show reasonable cause. It is usually better to address the issue before the IRS contacts you.

The following 4 steps are a practical starting point before filing late:

• Confirm whether the inheritance exceeded the $100,000 threshold for that tax year.
• Gather estate, bank, and valuation records showing the date and amount received.
• Review whether FBAR, Form 8938, Form 8621, or income reporting was also missed.
• Prepare a reasonable cause statement when facts support one.

 

 

If missing foreign account filings or tax returns are part of the problem, the IRS Streamlined Filing Compliance Procedures may apply only when the taxpayer can certify non-willful conduct. TFX explains the process in our streamlined foreign offshore procedures guide.

Have you missed or had late filings? Let us get you compliant; we have 14+ years experience in helping 2,200+ Americans

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FBAR

FBAR applies when a US person’s foreign financial accounts exceed $10,000 in aggregate at any time during 2025. Inherited foreign real estate itself is not an FBAR account, but inherited bank, brokerage, securities, or similar financial accounts can trigger FBAR reporting.

The FBAR is filed electronically through FinCEN, not with the IRS income tax return. The 2025 FBAR is due April 15, 2026, with an automatic extension to October 15, 2026.

Based on our client scenario at TFX: a US expat inherited €85,000 in a foreign bank account in March 2025 and transferred the funds to a US account in May 2025. FBAR could still apply because the foreign account exceeded $10,000 during the year before the transfer.

The current inflation-adjusted maximum civil penalties for FBAR penalties assessed on or after January 17, 2025, are higher than the older $10,000 and $100,000 figures. Non-willful violations can be up to $16,536 per violation, while willful violations can be the greater of $165,353 or 50% of the account balance.

For more details, see our guide to FBAR penalties and FinCEN’s page on how to report foreign bank and financial accounts.

Form 8938

Form 8938 applies when specified foreign financial assets exceed the taxpayer’s filing-status and residency thresholds. For taxpayers living abroad in 2025, the thresholds are generally over $200,000 on the last day of the year or over $300,000 at any time for single or married filing separately, and over $400,000 year-end or over $600,000 anytime for married filing jointly.

FBAR vs. Form 8938 in 1 sentence: FBAR reports foreign financial accounts to FinCEN, while Form 8938 reports specified foreign financial assets to the IRS with the income tax return. Filing Form 8938 does not replace FBAR.

US-resident thresholds are lower. A single US resident generally checks Form 8938 if specified foreign financial assets exceed $50,000 at year-end or $75,000 at any time, while married filing jointly residents use $100,000 year-end and $150,000 anytime thresholds.

Form 8938 valuation focuses on specified foreign financial assets and generally uses maximum values during the year for reporting. That is different from Form 3520 inheritance reporting, where the key value is generally the fair market value when the gift or bequest is received.

Read our Form 8938 guide and our article on foreign account exemptions from FATCA reporting before deciding that FATCA does not apply.

Schedule B

Schedule B is not a foreign inheritance form by itself, but it can apply when a taxpayer has more than $1,500 of taxable interest or ordinary dividends or must answer foreign account or foreign trust questions. Schedule B Part III asks about foreign accounts and foreign trusts.

The following 2 points keep Schedule B in the right role:

• File Schedule B if the inherited account generated reportable interest or dividends above normal Schedule B triggers, or if the foreign account or trust questions apply.
• Do not treat Schedule B as a substitute for Form 3520, FBAR, Form 8938, Form 8621, or Form 3520-A.

Schedule B can also intersect with FATCA and CRS data matching. See our article on FATCA and CRS reporting requirements for how foreign financial institutions may report account data.

Income from inherited foreign assets

Inherited assets can create taxable income after receipt, even when the inheritance itself is not taxable income. In 2025, that later income may include interest, dividends, rent, business income, annuity payments, pension distributions, PFIC income, or gain from selling inherited property.

Foreign income tax paid on post-inheritance income may qualify for a foreign tax credit, generally on Form 1116. Foreign inheritance tax, foreign estate tax, or succession tax paid to another country is usually not a US income tax credit because the foreign tax credit generally applies to foreign income taxes, not transfer taxes.

The following 5 inherited asset categories deserve extra review:

• Foreign brokerage accounts: dividends, interest, capital gains, and Form 8938 issues may apply.
• PFICs: foreign mutual funds, ETFs, or investment companies may require Form 8621.
• Business interests: ownership in a foreign company or partnership can create complex information filings.
• Life insurance and annuities: proceeds, cash value, or annuity payments may need tax review.
• Foreign trusts: distributions may require Form 3520 Part III and possibly Form 3520-A.

If the inherited asset is a rental property, use our foreign rental income tax guide to separate rent, expenses, depreciation, and foreign tax credit issues.

Types of taxable income

At least 6 types of income can arise after a foreign inheritance: interest, dividends, rents, gains, PFIC income, and trust or pension distributions. The form depends on the asset, not just the fact that it was inherited.

The main tax issue is the asset’s post-inheritance activity, not the label “inheritance.”

 

PFIC rules are a common surprise because many non-US mutual funds and ETFs are PFICs. Review our PFIC taxes guide and the IRS page for Form 8621 if you inherited foreign funds.

Need to do your PFIC reporting? Let us assist you in getting it done right the first time.

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Foreign inheritance examples by asset type

Foreign inheritance reporting changes by asset type, and 7 common assets create different combinations of Form 3520, FBAR, Form 8938, and later income tax. The table below assumes a US person receives the asset in 2025 and must file in 2026.

Use the $100,000 Form 3520 threshold first, then test account reporting, FATCA reporting, and later income.

 

Foreign trust cases should not be treated as ordinary inheritance cases. Read our guide on what a foreign trust is before completing Form 3520.

Basis and step-up rules

Inherited property generally receives a basis based on fair market value at the date of death or the alternate valuation date if properly used by the estate. For foreign property, strong documentation matters because the IRS may need USD values, appraisal support, and sale records years later.

Based on our client scenario at TFX: a US citizen inherited an apartment in Spain with a date-of-death fair market value of $300,000. If the apartment was later sold for $350,000 before selling expenses, the US gain before expenses would generally be $50,000, not $350,000.

The following 4 records help support stepped-up basis:

• Date-of-death appraisal or formal valuation
• Probate, estate, or inheritance documents
• Exchange rate used to convert local currency to USD
• Purchase, improvement, and sale records if available

The US inheritance tax on foreign property is usually not the issue for the recipient. The larger US issue is often basis future sales gains, and whether rental income or entity ownership creates additional forms.

Reporting and withholding

Foreign inheritance reporting should be documented using the receipt date, fair market value, currency conversion, foreign taxes withheld, and estate records. US tax returns generally use US dollars, and foreign currency items are translated using an exchange rate that properly reflects the transaction.

The following 6 records should be saved for at least the filing period and longer if the asset may be sold later:

• Inheritance or probate document
• Date the asset was received
• Fair market value on the receipt date or date of death
• Exchange rate source and calculation
• Foreign tax withholding or estate tax documents
• Account statements, appraisal, and transfer records

 

 

Foreign taxes withheld from rental income, dividends, or sale proceeds may be relevant to Form 1116. A foreign inheritance or estate tax paid to another country usually needs separate analysis because it is not automatically creditable as foreign income tax.

Which states tax foreign inheritance?

Most US states do not tax a recipient merely because they inherited foreign property, but state estate or inheritance tax rules can matter when the decedent, estate, beneficiary, or property has a state connection. For 2026, the federal estate tax filing threshold is $15,000,000, while state thresholds can be much lower.

This section should stay concise because state death tax rules change and are not specific to foreign inheritances. The better question is whether your US state taxes estates, inheritances, or residents with worldwide income connected to inherited assets.

Washington is a good example of why the article should avoid a static 50-state table. The Washington Department of Revenue lists date-of-death estate tax thresholds and rate tables, including a 2026 filing threshold and exclusion amount of $3,076,000, so Washington cases should be checked directly against the DOR’s current tables before publication.

For a broader state-level overview, see our guide to estate taxes for expatriates. ACTEC’s state death tax chart is useful for screening, but state agency pages should control when numbers differ.

How to report foreign inheritance to the IRS

Reporting a foreign inheritance to the IRS is a 6-step process: identify the source, value the asset in USD, test Form 3520, check FBAR and Form 8938, report later income, and keep records. This process applies even when the inheritance itself is not taxable income.

The IRS rules on foreign inheritance are source-driven. A distribution from a foreign estate is not treated the same as a foreign trust distribution, and a transfer from a foreign corporation or partnership uses a lower threshold than a normal family bequest.

The following 6 steps should be followed before filing:

1. Identify whether the transfer came from a foreign individual, foreign estate, foreign trust, corporation, partnership, or covered expatriate.
2. Value the inheritance in US dollars using supportable exchange rates.
3. Check Form 3520 thresholds and Part IV reporting rules.
4. Check FBAR if foreign accounts exceeded $10,000.
5. Check Form 8938 if specified foreign financial assets exceeded FATCA thresholds.
6. Report interest, dividends, rent, gains, or trust income after receipt.

See our streamlined filing compliance procedures guide if the inheritance exposed older missed returns or foreign account filings.

Map the source and the story

There are 4 common source categories for inherited foreign assets: foreign estate, foreign individual, foreign trust, and foreign entity. The source determines whether Form 3520 Part IV, Form 3520 Part III, Form 3520-A, Form 708, or entity reporting may be relevant.

A foreign estate usually means property passes through probate or an estate administration outside the US. A foreign individual gift can look similar, but may not come through an estate.

A foreign trust distribution is different and may require Form 3520 Part III. The IRS foreign trust rules also explain when US owners, beneficiaries, and foreign grantor or nongrantor trust statements matter.

A transfer from a covered expatriate can create separate Section 2801 issues. That is not the same as normal foreign inheritance tax reporting.

Add up what was received and compare to thresholds

For 2025, Form 3520 Part IV generally applies when aggregate gifts or bequests from a nonresident alien individual or foreign estate exceed $100,000. Once that threshold is crossed, each gift or bequest over $5,000 must be separately identified.

Based on our client scenario at TFX: $60,000 from one foreign parent plus $45,000 from a related foreign estate equals $105,000. That total generally triggers Form 3520 because related transfers are aggregated.

The $100,000 test is based on what was received during the tax year. If you receive installments across 2 calendar years, each tax year needs its own calculation.

Watch for the entity threshold

The foreign corporation or partnership threshold is much lower than the $100,000 foreign individual or estate threshold. The IRS lists $20,116 for 2025 and $20,573 for 2026, and it may recharacterize purported gifts from foreign corporations or partnerships.

This category is rare but risky because a payment from a foreign company is not the same as a normal family inheritance. It may require a deeper review of shareholder relationships, employment, services, business distributions, or disguised income.

Read our guide to Form 3520-A if the transfer involves a foreign trust structure rather than a simple estate.

Classify it correctly before filling anything out

Foreign trust inheritance is not always simple foreign inheritance reporting. Form 3520 instructions distinguish Part III foreign trust distributions from Part IV foreign gifts and bequests, and the wrong part can create an incomplete filing.

Warning – foreign trust inheritance ≠ simple foreign inheritance.
If the asset came through a foreign trust, check whether Form 3520 Part III, a Foreign Grantor Trust Beneficiary Statement, a Foreign Nongrantor Trust Beneficiary Statement, or Form 3520-A applies.

Certain tax-favored foreign trusts may receive limited relief from Forms 3520 and 3520-A, but those exceptions are not automatic. See our article on relief from filing Forms 3520-A and 3520 for certain tax-favored foreign trusts and the IRS page for Form 3520-A.

Follow Form 3520 filing procedures and calendar

For 2025 foreign inheritance reporting, Form 3520 is generally due on the 15th day of the 4th month after the tax year ends, with a June 15 deadline for qualifying taxpayers abroad and an October 15 deadline if Form 4868 extends the income tax return. The form is filed separately from Form 1040.

Form 3520 timing depends on where the taxpayer lives and whether a valid extension was filed.

 

Form 3520 is generally mailed to the IRS Service Center in Ogden, Utah, using the address in the current instructions. It is not simply attached to the Form 1040 package.

TFX also offers a free expat tax extension service if you need more time to file your 2025 return and related forms. The IRS Form 4868 instructions explain how the income tax return extension works.

Check foreign accounts for FBAR

FBAR applies if aggregate foreign financial accounts exceeded $10,000 at any time during 2025. Transferring inherited money to a US account later does not erase the FBAR trigger if the foreign account crossed $10,000 earlier in the year.

Inherited foreign accounts should be reviewed as soon as account statements are available. Bank accounts, brokerage accounts, and certain securities accounts can count for FBAR purposes, even when the inherited funds are later moved.

File FBAR through the BSA e-filing system, not with the IRS return. TFX’s FBAR guide explains the filing basics for US expats.

Confirm whether Form 8938 is triggered

Form 8938 does not replace FBAR and uses separate thresholds. US-resident single taxpayers start testing at $50,000 year-end or $75,000 anytime, while qualifying taxpayers living abroad start at $200,000 year-end or $300,000 anytime.

Form 8938 can cover more than foreign accounts. It can include foreign stock, foreign partnership interests, foreign financial instruments, and other specified foreign financial assets when threshold tests are met.

Form 8938 valuation often looks to the maximum value during the year and specific year-end threshold rules. Form 3520 inheritance valuation focuses on the amount received and the character of the transfer, so using “end-of-year rates for both forms” is too broad.

If your inherited assets are close to the FATCA threshold, review our article on FBAR vs. FATCA before filing.

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Common documentation needed

A clean foreign inheritance file should include at least 6 categories of records: estate papers, identity of the payer, valuation support, bank statements, exchange rates, and tax documents. These records support Form 3520, FBAR, Form 8938, basis, and later income reporting.

The following 6 documents help reduce filing errors:

• Probate, estate, or inheritance certificate
• Bank, brokerage, or transfer statements
• Appraisal or fair market value support
• Currency conversion calculation
• Foreign tax withholding documents
• Correspondence showing whether the transfer came from an estate, individual, trust, corporation, or partnership

Good documentation is especially important when applying the US inheritance tax on foreign property rules to a later sale. The documents you gather in 2026 may determine the gain calculation years later.

What if the inheritance comes from a covered expatriate?

A gift or bequest from a covered expatriate can trigger Section 2801 tax and Form 708, which is separate from normal Form 3520 foreign inheritance reporting. Final regulations apply to covered gifts and bequests received on or after January 1, 2025.

For 2025 and 2026, the annual exclusion amount referenced in the Form 708 instructions is $19,000. Form 708 has its own due date rules, and the 2025 Form 708 is due June 15, 2027, under the IRS instructions.

This is a specialist issue because Section 2801 can create actual US tax on a transfer that otherwise might look like a foreign inheritance. See our guide to exit tax if the donor or decedent gave up US citizenship or long-term green card status.

Conclusion

Foreign inheritance tax rules for US persons are mostly reporting rules, not income tax rules. For 2025 tax-year filings in 2026, the main numbers are $100,000 for Form 3520 foreign individual or estate bequests, $10,000 for FBAR foreign accounts, and Form 8938 thresholds that vary by residence and filing status.

The following 3 points summarize the article:

• No federal income tax on most inherited principal: gifts and inheritances are generally excluded from income.
• Report large foreign inheritances: Form 3520 generally applies above $100,000 from a foreign individual or estate.
• Tax can arise later: interest, dividends, rent, PFIC income, trust distributions, and gains can be taxable after receipt.

If you inherited foreign assets and also missed older returns or FBARs, review TFX’s streamlined filing procedure service. Foreign inheritance reporting is easier to fix before deadlines and IRS notices. TFX can help you confirm the right forms, values, and filing path for your 2025 tax year.

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