Definition of Nonresident Alien (NRA)
Different from nonresident alien for the income tax purpose, under gift tax regulations, a “resident” is a person who has his domicile in the United States. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of later leaving that place. A person’s residence will not qualify as a domicile unless the person has the requisite intent to remain in such residence indefinitely. An intention to change domicile will not generate such a change unless accompanied by actual removal; intent to leave is not sufficient.
An individual who is present in the United States on a non-immigrant visa can be considered a resident for gift tax purposes if the individual wants to permanently remain in the United States even though the visa does not allow permanent residence.
Because the determination of a person’s “domicile” relies upon the intent of an individual, a bright-line test to determine if an individual is a resident for federal gift tax purposes is not available. Therefore, the courts consider the following factors in making such a determination: visas, work permits, location of business and property interests, family immigration history, residential property, individual testimony, motivation, duration of stays in theUnited States, and community group affiliations.
The gift tax for resident aliens follows the same rules and regulations as do the gift of U.S. citizens to determine gift tax liability. However, the gifts of nonresident aliens are taxed differently.
US Gift Tax for NRA
According to I.R.C. Section 2501(a); Regulation §25.2501-1, a nonresident alien is subject to gift tax on transfers of real and tangible property situated in the United States. There are differences in the foreign gift tax treatment of cash and property. Treatment of property for estate tax purpose is listed for comparison.
| Item |
Gift tax |
Estate tax |
| Cash in US bank/brokerage account |
Yes |
No |
| Bank deposits |
No |
No |
| US bonds |
No |
Yes |
| Non-US government bonds |
No |
No |
| U.S. stocks |
No |
Yes |
| Interest in US partnership/LLC |
No |
Yes |
| Real estate property |
Yes |
Yes |
| Art and other Tangible personal property in US |
Yes |
Yes |
| Life insurance policy of NRA |
No |
No |
| Annuities |
No |
Yes |
| Retirement plan |
No |
Yes |
Annual Gift Tax Exclusion
nonresident aliens are entitled to annual exclusion for gifts of up to $15,000 per donee, unlike U.S. citizens, nonresident aliens cannot “split gifts” with their spouse (and thus effectively double their annual gifts). There is no unlimited marital deduction for gift tax purpose for property flowing to a non-citizen spouse. In fact, such gifts are currently capped at $136,000 in 2011, indexed for inflation.
| Year |
Nonspouse |
Spouse nonresident |
Spouse resident |
| 2015 |
14,000 |
147,000 |
Unlimited |
| 2016 |
14,000 |
148,000 |
Unlimited |
| 2017 |
14,000 |
149,000 |
Unlimited |
| 2018 |
15,000 |
152,000 |
Unlimited |
| 2019 |
15,000 |
155,000 |
Unlimited |
| 2020 |
15,000 |
157,000 |
Unlimited |
| 2021 |
15,000 |
159,000 |
Unlimited |
Estate Tax Exemption
Most US taxpayers won’t ever pay gift tax because the IRS allows taxpayers to estate tax exemption to offset their lifetime gift tax without having to pay gift tax. The $11.7 million exemption applies to gifts and estate taxes combined—whatever exemption you use for gifting will reduce the amount you can use for the estate tax. The IRS refers to this as a “unified credit.” Unlike U.S. citizens and resident aliens, nonresident aliens receive a $60,000 exemption from U.S. estate tax. This exemption may be applied estate tax only. It cannot e used to offset U.S. gift tax.
Gift Tax Rate
The gifts are taxed at the same rates that apply to U.S. citizens. Just like your federal income tax, the gift tax is based on marginal tax brackets. And rates range between 18% and 40%. If you want to calculate the taxable income for gifts exceeding the annual exclusion limit, the table below breaks down the rate that you will have to pay based on the value of the gift.
| 2021 Gift Tax Rates | |
| Gift Value Above the Annual Exclusion Limit | Rate |
| Up to $10,000 | 18% |
| $10,001 to $20,000 | 20% |
| $20,001 to $40,000 | 22% |
| $40,001 to $60,000 | 24% |
| $60,001 to $80,000 | 26% |
| $80,001 to $100,000 | 28% |
| $100,001 to $150,000 | 30% |
| $150,001 to $250,000 | 32% |
| $250,001 to $500,000 | 34% |
| $500,001 to $750,000 | 37% |
| $750,001 to $1,000,000 | 39% |
| More than $1,000,000 | 40% |
Reporting Gift Tax
According to the IRS, if you are an un-domiciled alien who made a gift subject to foreign gift tax, you must file a gift tax return (Form 709) if:
- You gave any gifts of future interests,
- Your gifts of present interests to any person other than your spouse total more than $15,000 (2021) per year, or
- Your gifts to your non-US citizen spouse total more than $159,000 (2021) per year
