At the Federal level, receiving a gift or inheritance has different implications if the donor is a US citizen or if the donor is a foreign person.

US donor

Currently, the exclusion for estates at the Federal level is $13,990,000 per individual and $19,000 for gifts in 2025.

Case US donor 1: If the taxpayer receives $10 million for the estate of his father that has not used any of the exclusion previously, there will be no taxes paid at the Federal level.

Case US donor 2: If the taxpayer receives $10 million as a gift from his father that has not used any of the exclusion previously, then, a form 709 gift tax return must be filed and it will disclosed that out of the almost $14 million exclusion, the donor has used $10 million leaving a remaining $4 million to provide until hitting the threshold. If the next year, the father donated another $5 million, then $1 million would be over the threshold and subject to gift taxes.

Case US donor 3: If the taxpayer receives $19,000 as a gift from a US donor, then, the donor would not have to report anything at Federal level. The donor could make as many $19,000 gift as wanted to family members, friends, strangers, etc. to reduce his/her estate.

Foreign donor

The threshold is much smaller than the US donor, once it exceeds $100,000, then, you have to file Form 3520. Note that if the gift comes from a foreign corporation, then the threshold is much smaller around $20k for 2025.

Case Foreign donor: If the taxpayer receives $200,000 from his father citizen of a foreign country, then, it has to report the amount. It does not mean that it is considered gross income to him, but if it is not reported, the IRS can charge penalties of the greater of $10,000 or 35% of the gross value of the property or distributions or 5% of value of foreign trust.

At the State level, each State is different and it might have inheritance taxes depending on the relation to the donor, amount received, etc. so there are more variables at this level.

For any significant gift, bequest, inheritance, etc. is relevant to get appropriate guidance and potentially tax planning in certain cases to ensure compliance and avoid costly errors, which might include severe penalties. Reach out to our tax team for further details on this topic.

IRS Link – IRS releases tax inflation adjustments for tax year 2025