The 40% Death Tax on Your U.S. Property: The Non-Resident Estate Tax Trap
Published on: July 20, 2026
Last reviewed: 20 July 2026. Tax thresholds and rules change; verify current figures before relying on them.
Most foreign buyers of a Miami condo or a Manhattan apartment plan carefully for the purchase, the rental income, and the eventual sale. Almost none plan for the one event that can cost their family the most: death while still owning the property.
Here is the trap in a single sentence. A U.S. citizen can pass on roughly $15 million free of federal estate tax in 2026. A non-U.S. person (a "non-resident alien" in tax language) who owns U.S. property gets an exemption of just $60,000, and everything above that can be taxed at rates reaching 40%. That gap is not a typo, and it applies whether your total worldwide wealth is modest or vast. It only takes one U.S. property to trigger it.
This guide explains exactly how the non-resident estate tax works, which assets are caught, where treaties help, and the questions to ask a qualified adviser before it becomes your family's problem to solve.
Key facts at a glance
- Exemption for non-U.S. persons: only $60,000 of U.S.-situs assets (versus ~$15 million for U.S. citizens and residents in 2026).
- Top rate: up to 40% on the taxable amount above the exemption.
- What's caught: U.S. real estate (always), tangible property physically in the U.S., and shares of U.S. companies.
- Filing: the estate must file Form 706-NA within 9 months of death if U.S.-situs assets exceed $60,000.
- Treaties: the U.S. has estate-tax treaties with a limited group of countries that can substantially increase the available exemption.
- Practical bite: title companies and banks often will not release assets to heirs until estate-tax clearance is shown.
Two systems, one enormous gap
The U.S. federal estate tax applies at death to the transfer of property. How it applies depends entirely on your status:
- U.S. citizens and "domiciliaries" (people who live in the U.S. with the intention of staying) are taxed on their worldwide estate, but they receive a very large unified exemption. Under the tax law signed in July 2025, that exemption is set at $15 million per person for 2026, indexed for inflation, and married couples can effectively double it.
- Non-domiciled, non-resident aliens are taxed only on their U.S.-situs assets, but they receive an exemption of only $60,000. Above that, the same graduated rate schedule applies, climbing to a 40% top rate.
A crucial distinction: estate-tax residency is not the same as income-tax residency. You can spend years filing U.S. income tax returns as a non-resident, or hold a property purely as an investment you have never lived in, and still be a non-domiciliary for estate-tax purposes. Domicile is a facts-and-circumstances test based on where you live and intend to remain, not a day-count.
The $60,000 figure is also not indexed for inflation. It has sat at that level for decades while the citizen exemption has climbed into the tens of millions. That is what turns an ordinary cross-border property purchase into a latent liability.
What counts as a "U.S.-situs" asset
Because non-residents are taxed only on U.S.-situs property, the entire game is understanding what has U.S. situs. The rules are asset-specific and, in places, counterintuitive.
Generally treated as U.S.-situs (potentially taxable at death):
- U.S. real estate: always U.S.-situs. A house, condo, or land in the United States is caught regardless of how the buyer is structured personally.
- Tangible personal property physically located in the U.S.: furnishings, cars, art, and similar items sitting in the country.
- Shares of U.S. corporations: U.S. stock (think a directly held position in a U.S.-listed company) is U.S.-situs for estate-tax purposes, no matter where the share certificate or brokerage account is located.
Generally treated as non-U.S.-situs (typically outside the taxable U.S. estate):
- Deposits in U.S. bank accounts (under specific rules), U.S. Treasury and certain U.S. debt obligations, and proceeds of life insurance on the non-resident's life are commonly outside the U.S. taxable estate.
The takeaway for a property owner is blunt: real estate held directly gives you no hiding place. Unlike a stock position, which can sometimes be restructured, a directly owned U.S. home is squarely U.S.-situs. This is precisely why cross-border families so often look at ownership structures (trusts, foreign holding companies, and similar vehicles) before buying, but every one of those structures carries its own income-tax, reporting, and cost trade-offs and must be designed with professional advice. Setting one up incorrectly can create bigger problems than it solves.
The gift-tax mirror image, and the trap inside it
You might think: if death is the problem, why not simply give the property to my children while I'm alive? Here the rules flip in a way that catches many people out.
For non-residents, the U.S. gift tax applies to gifts of real estate and tangible personal property situated in the U.S., the very assets you would most want to move. But gifts of U.S.-situated intangible property, such as shares of U.S. corporations, are not subject to U.S. gift tax at all (this is written into the tax code itself).
The asymmetry is the point:
| Asset | Caught by U.S. estate tax at death? | Caught by U.S. gift tax if given away? |
|---|---|---|
| U.S. real estate | Yes | Yes |
| U.S. company shares | Yes | No (intangible) |
| Tangible property in the U.S. | Yes | Yes |
So a non-resident can sometimes gift a U.S. share portfolio without triggering gift tax, but cannot simply gift the U.S. house without exposure. And non-residents do not get the multi-million-dollar lifetime gift exemption that citizens enjoy. They have only the modest annual exclusion (around $19,000 per recipient in 2026, indexed) and a much larger annual exclusion for gifts to a non-citizen spouse (roughly $194,000 in 2026, indexed). Always confirm the current-year figures, as these amounts move annually.
Where estate-tax treaties change the maths
The single most important factor after "do I own U.S. property?" is "does my country of residence have an estate-tax treaty with the United States?"
The U.S. maintains estate-tax treaties with a limited number of countries. The IRS lists these as: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom. (The precise count cited by advisers sometimes varies because Canada's relief is delivered through the income-tax treaty rather than a standalone estate-tax treaty, and provisions differ significantly from country to country.)
What a treaty can do varies, but common effects include:
- Allowing a resident of the treaty country to claim a pro-rata share of the full U.S. exemption, often vastly more than the flat $60,000. The share is typically proportional to the value of U.S.-situs assets relative to the worldwide estate.
- Re-defining situs for certain assets, or limiting U.S. taxation to U.S. real property only.
- Preventing double taxation where both the U.S. and the home country tax the estate.
If you live in a treaty country, treaty relief is usually claimed on the U.S. estate-tax return and typically requires disclosure of worldwide assets. If you live in a non-treaty country, you are exposed to the bare $60,000 exemption unless you have planned around it in advance.
A worked example
Consider a non-resident who owns a $900,000 apartment in Florida and holds it directly in their own name. They live in a country with no U.S. estate-tax treaty.
- U.S.-situs assets at death: $900,000 (the property).
- Exemption available: $60,000.
- Taxable amount: $840,000.
- Applying the graduated estate-tax schedule (topping out at 40%), the liability runs into the hundreds of thousands of dollars, payable, in cash, within nine months of death, before the property can be cleanly transferred to the heirs.
Now change one fact: the same owner is instead resident in a treaty country whose treaty grants a proportional share of the full U.S. exemption. If U.S. assets are a small fraction of a larger worldwide estate, the available exemption can rise dramatically, potentially eliminating the tax entirely. Same property, same value, radically different outcome, determined by residence and planning, not by the asset.
(Figures are illustrative and rounded to show the mechanics; they are not a computation for any specific estate.)
Why this becomes a real, practical crisis
The estate tax is not just a number on a form. In practice:
- The estate must file Form 706-NA (the U.S. Estate Tax Return for nonresident non-citizens) within 9 months of death when U.S.-situs assets exceed $60,000. Extensions to file are possible, but not to pay.
- Assets get frozen. Real-estate title companies and financial institutions frequently require proof that U.S. estate tax has been dealt with (often a federal transfer certificate) before they will transfer title or release assets to heirs. Families can find a property effectively locked while grieving.
- It stacks with home-country tax. The heirs may also face inheritance or estate tax in the country of citizenship or residence, raising the spectre of double taxation that only a treaty (where one exists) can relieve.
Tools families and advisers commonly discuss
None of the following is a recommendation. Each is a structure with meaningful trade-offs that only a qualified cross-border estate lawyer and tax adviser should design. But you will hear these terms, so it helps to know what they are:
- Qualified Domestic Trust (QDOT): allows estate tax on assets passing to a non-citizen surviving spouse to be deferred, since non-citizen spouses do not automatically qualify for the unlimited marital deduction that U.S.-citizen spouses receive.
- Life insurance: death-benefit proceeds are generally outside the U.S. taxable estate, so insurance is often used to provide the liquidity needed to pay an estate-tax bill without a forced sale of the property.
- Holding structures (foreign corporations, trusts, and layered vehicles): sometimes used to change the situs analysis for real estate, but these carry their own U.S. income-tax, anti-abuse, and annual-reporting consequences and can backfire if used without expert design.
The common thread: the cheapest and most effective moment to address this is before you buy, or at least well before any health event. Retrofitting a structure onto property you already own is harder, costlier, and sometimes impossible without triggering tax.
Frequently asked questions
Does the U.S. estate tax apply even if I've never set foot in America?
Yes. It applies to your U.S.-situs assets regardless of your physical presence. Owning U.S. real estate is enough. Physical presence goes to income-tax residency, which is a separate question.
Is a $200,000 condo really exposed? That seems small.
Yes. Because the exemption for non-residents is only $60,000, even a modest property creates a taxable estate. Total worldwide wealth is irrelevant to whether the tax applies to your U.S. assets.
I hold U.S. stocks through a broker outside the U.S., am I safe?
Generally no for estate tax. U.S. company shares are U.S.-situs for estate-tax purposes regardless of where the account or certificate sits. (Note the mirror-image rule: gifting those same shares is generally not subject to U.S. gift tax, because they are intangible.)
Does putting the property in a company avoid the tax?
Sometimes the situs analysis changes when real estate is held through certain non-U.S. entities, but this creates other U.S. income-tax and reporting obligations and must be structured correctly. Done wrong, it can be worse than direct ownership. This is a job for a specialist, not a template.
When is the estate-tax return due?
Form 706-NA is generally due within 9 months of the date of death where U.S.-situs assets exceed $60,000. Plan for liquidity to meet that deadline.
How do I know if my country has a treaty?
Check whether your country of residence appears on the IRS list of estate-tax-treaty countries, and have an adviser read the specific treaty. Provisions and relief differ substantially between them.
The bottom line
If you own, or plan to buy, property in the United States as a non-resident, the estate tax is the single most under-planned risk in your file. The exemption is tiny, the rate is high, the asset is illiquid, and the deadline is short. But it is also entirely foreseeable. Whether your country has a treaty, how you hold the property, and whether you have arranged liquidity to meet a nine-month deadline are all decisions you can make now, calmly, rather than leaving your family to make them under the worst possible circumstances.
Sources & further reading
- Internal Revenue Service, Estate tax for nonresidents not citizens of the United States and Some nonresidents with U.S. assets must file estate tax returns (irs.gov)
- Internal Revenue Service, Gift tax for nonresidents not citizens of the United States (IRC section 2501(a)(2), intangibles exclusion) (irs.gov)
- Internal Revenue Service, SOI Tax Stats: Nonresident Alien Estate Tax Study (list of estate-tax-treaty countries) (irs.gov)
- Internal Revenue Service, Frequently asked questions on estate taxes for nonresidents not citizens of the United States (irs.gov)
Verify all figures for the relevant tax year before relying on them; inflation-indexed amounts change annually.
This article is general information for international property owners and does not constitute legal, tax, or estate-planning advice. U.S. transfer-tax rules are complex, fact-specific, and change over time; treaty relief depends entirely on the specific treaty and your circumstances. Always consult qualified U.S. estate counsel (and an adviser in your home country) before buying, holding, gifting, or structuring U.S. property.
JanusHermes is the cross-border real estate intelligence platform built for international buyers operating across 50+ countries. Explore markets, costs, and country-level intelligence at janushermes.com.
