Non-Resident Alien Estate Tax: $60,000 Exemption, Rates, Form 706-NA

The United States imposes estate tax on a non-resident alien only on property located in the United States, and only above a $60,000 exemption. Everything above that threshold is taxed at graduated rates that reach 40% on amounts over $1 million. The executor files Form 706-NA within nine months of the date of death, and a federal tax lien sits on the US assets until the IRS confirms the tax has been paid.¹²

Compare that $60,000 exemption to the $15 million available to US citizens for 2026, and the reason this tax matters becomes obvious.³ A single US rental property, a brokerage account holding shares of a US corporation, or artwork stored in a New York apartment can be enough to trigger a filing obligation and a real tax bill.

Who Counts as a Non-Resident Alien for Estate Tax

The estate tax uses domicile, not the day-counting residency tests that govern income tax. A person is domiciled in the United States if they live here with the intent to remain indefinitely. A temporary stay for a defined purpose does not create domicile, even one that lasts years.⁴

The IRS looks at objective indicators of intent: where the person’s family lives, where vehicles are registered, the jurisdiction where a will was executed, voter registration, visa type, and the location of primary bank and brokerage accounts. No single factor decides it. The analysis is holistic, which makes it both harder to predict and easier to dispute than the income tax rules.

Holding a green card or meeting the Substantial Presence Test for income tax does not by itself establish estate tax domicile. These are separate frameworks.⁵ Certain visa categories also affect whether a person can form domiciliary intent at all. B-1, B-2, F, M, J, and E visa holders generally cannot, because those categories require an intent to depart. G-4 and certain diplomatic visa holders can, because their terms do not restrict length of stay.

If the IRS concludes the decedent was actually domiciled in the US, the $60,000 exemption disappears and the entire worldwide estate becomes taxable, on the same footing as a US citizen’s estate.⁴

What Property Is Taxed

The tax applies only to property with a US “situs,” meaning property the law treats as located in the United States. Everything else in the worldwide estate is ignored. The following are US situs:

US real estate, including land, homes, and commercial buildings.
Tangible personal property physically present in the US at death: jewelry, artwork, vehicles, furniture. Location of the item controls, not location of the owner.
Stock in US corporations, regardless of where the certificates are held or where the shares were purchased.
Certain US debt obligations, unless they qualify for the portfolio debt exclusion.

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Several categories that look US-connected are excluded. Life insurance proceeds on the decedent’s life are treated as non-US property regardless of who issued the policy. Deposits with US banks, savings institutions, or insurance companies are excluded so long as they are not connected with a US trade or business. Bonds and notes whose interest qualifies as “portfolio interest” under the income tax rules fall outside the taxable estate, which covers most widely traded US government and corporate bonds held by non-resident aliens. Stock of a foreign corporation is non-situs even if the company owns substantial US assets or trades on a US exchange.⁴⁶

US assets held in a trust can still be pulled into the taxable estate if the decedent retained a life estate, kept the power to revoke, or made transfers within three years of death that would trigger inclusion under the rules for US persons.⁷

Ownership structure also matters. A domestic LLC holding US real estate is generally disregarded for estate tax purposes, so the IRS looks through to the underlying property. A foreign corporation holding the same real estate changes the picture: the decedent owned foreign corporate stock, which is not US situs. That structural difference is one of the more common planning approaches for non-resident aliens buying US real estate, though it carries income tax and FIRPTA trade-offs that need separate analysis.

The $60,000 Exemption and the Rate Schedule

Non-resident aliens receive a unified credit of $13,000, which shelters the first $60,000 of US situs property from tax. If the net taxable estate is $60,000 or less, no tax is owed.¹ The $60,000 figure is not indexed for inflation and has been fixed for decades.

Everything above the exemption runs through the graduated rate schedule used for US citizen estates, starting at 18% and reaching 40% on amounts over $1 million.² A non-resident alien with $2 million of US situs property and no treaty relief could face an estate tax bill above $700,000.

Deductions and How They Are Prorated

Funeral expenses, administration costs, debts, and certain losses are deductible against the US situs estate, but most of them must be prorated. The ratio is the US situs estate over the entire worldwide estate. If US assets represent 10% of the decedent’s global wealth, only 10% of total funeral and administration costs comes off the US taxable estate.⁸

Two categories escape proration. Mortgages and debts specifically secured by US real property may be deducted in full against the value of that property. Bequests to qualifying US charitable organizations are also fully deductible. The executor has to document the entire worldwide estate to run the proration correctly, even though only US assets are taxed.

Transfers to a Surviving Spouse

A US citizen estate that leaves everything to a spouse pays no estate tax because of the unlimited marital deduction. A non-resident alien estate can claim a version of that deduction for US situs property, but only if the surviving spouse is a US citizen. When the surviving spouse is not a US citizen, the marital deduction is denied entirely unless the property passes through a Qualified Domestic Trust (QDOT).⁹

A QDOT requires at least one trustee who is a US citizen or a domestic corporation, that trustee must have the right to withhold estate tax from any principal distribution, and the executor must affirmatively elect QDOT treatment on the estate tax return. The election is not automatic.

Distributions of principal from the QDOT during the surviving spouse’s life trigger estate tax at that point, and any amount left when the surviving spouse dies is taxed then. In effect, the QDOT defers the tax rather than eliminating it. For couples where neither spouse is a US citizen, this is where planning gets expensive, but skipping the QDOT means losing the marital deduction on US situs property altogether.

How Estate Tax Treaties Change the Result

The United States has bilateral estate tax treaties with eighteen countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom. For citizens of those countries, the treaty overrides the standard domestic rules.

Treaties help in two typical ways. Some reclassify categories of US assets as non-situs property for citizens of the treaty country. And most replace the $13,000 unified credit with a prorated share of the full US citizen credit, based on the ratio of the US estate to the worldwide estate.

That prorated credit can be large. The US citizen exemption for 2026 is $15 million.³ If a German citizen’s US assets are 20% of their worldwide wealth, the prorated exemption would shelter roughly $3 million of US property. Without the treaty, the same estate has only $60,000 of shelter. Treaty benefits must be claimed on Form 706-NA with a statement identifying the specific provisions being invoked.¹

Lifetime Gifts Follow a Different, More Favorable Rule

US gift tax on non-resident aliens applies only to transfers of real property and tangible personal property located in the United States. Gifts of US-situated intangible property are not taxed. A non-resident alien can give away shares of US corporations during life and pay no US gift tax.¹⁰

The same stock held at death would be subject to estate tax at up to 40%. Transferring US corporate stock during life, rather than holding it, removes it from the taxable estate. The opportunity does not extend to US real estate or tangible personal property, which are taxable whether transferred by gift or held at death.

For 2026, the annual gift tax exclusion is $19,000 per recipient. Gifts to a non-citizen spouse have a higher annual exclusion of $194,000.¹¹ Non-resident aliens do not get a lifetime gift tax exemption equivalent to the citizen exclusion, so taxable gifts of US real property or tangible assets above the annual exclusion trigger gift tax immediately.

Filing Form 706-NA

The executor must file Form 706-NA if the value of US situs assets, combined with any prior taxable gifts, exceeds $60,000. The filing obligation exists even if no tax is owed after deductions and the credit are applied.¹

The return is due nine months after the date of death. A six-month filing extension is available through Form 4768, but the extension does not extend the time to pay. The full tax is due at the nine-month mark regardless of any filing extension.¹²

The return requires the decedent’s Social Security number, ITIN if one was previously used, or an IRS-assigned number. If none exists, line 2 is left blank and the IRS assigns a number during processing. The executor must also document their authority to act, typically with a certified copy of the will or a court appointment order.¹²

Payment can be made by check, money order, or through the Electronic Federal Tax Payment System. The federal government holds a lien on all US situs assets until the tax is fully satisfied, which can freeze real estate closings and brokerage transfers until the IRS confirms the obligation is resolved.

Penalties and Interest

A late return draws a penalty of 5% of the unpaid tax for each month or partial month it is late, capped at 25%.¹³ Late payment runs separately at 0.5% per month, also capped at 25%. When both apply, the failure-to-file penalty is reduced by the failure-to-pay amount, so the combined rate during the first five months is still 5% per month. On top of the penalties, the IRS charges interest on unpaid balances at 7% annually as of early 2026, compounding daily.¹⁴

Undervaluing US assets adds another risk. If a reported value is 65% or less of the correct value, the IRS imposes a 20% accuracy penalty on the resulting underpayment, provided that underpayment exceeds $5,000. If the reported value is 40% or less of the correct value, the penalty doubles to 40%.¹⁵ Real estate appraisals are where this issue most often surfaces. A qualified, independent appraiser with US market experience is worth the cost.

Clearing the Lien to Sell or Transfer Assets

Until the IRS is satisfied the tax is paid, a statutory lien attaches to every US situs asset. Selling real property or transferring brokerage accounts requires clearing it. The path depends on whether the executor is appointed and acting in the United States.

When a US-based executor is in place, the estate can apply for a discharge of the lien on specific property using Form 4422. The application should be submitted at least 45 days before any planned closing.¹⁶ The application includes a legal description of the property, the sales contract, an appraisal, and a copy of the filed Form 706-NA (or a draft if not yet filed).

When no executor is appointed within the United States, the estate needs a transfer certificate. The IRS issues one only after completing its investigation and confirming the tax has been paid or provided for. Processing takes six to nine months from receipt of complete documentation.¹⁷ If Form 706-NA was required, the estate submits a copy of the filed return. If no return was required because US assets fell below $60,000, the estate submits the death certificate, copies of the will, foreign death tax returns, and an affidavit listing all US assets and values.

The transfer certificate process is slow enough that it routinely delays real estate sales and distributions. Estates with US real property should begin it right after filing Form 706-NA, not wait for a buyer.

FIRPTA and GST: Two Adjacent Obligations

When an estate sells US real property, the buyer is generally required to withhold 15% of the gross sale price under the Foreign Investment in Real Property Tax Act.¹⁸ This is a prepayment against income tax on the gain, not the estate tax. The estate can apply for a reduced withholding by filing Form 8288-B before closing if the actual income tax liability will be less than 15% of the sale price. FIRPTA runs on a separate track from the estate tax lien and transfer certificate, so an estate liquidating US real estate may be working both processes at once.

The generation-skipping transfer tax applies to non-resident aliens too, but only where the underlying transfer is already subject to US estate or gift tax. A direct skip to a grandchild of US situs property at death triggers GST tax on top of the estate tax, at a flat 40% rate.¹⁹ Non-resident aliens receive a GST exemption, though its exact amount for 2026 depends on whether the statutory $1 million base or an indexed figure applies. For US citizens and domiciliaries the 2026 GST exemption is $15 million.²⁰ Estates leaving US property to grandchildren or to generation-skipping trusts should account for this additional layer, which is reported on the same Form 706-NA.

1
Internal Revenue Service. Instructions for Form 706-NA (09/2025)
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GovInfo. 26 USC 2101 – Tax Imposed
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Internal Revenue Service. What’s New – Estate and Gift Tax
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Internal Revenue Service. Some Nonresidents with U.S. Assets Must File Estate Tax Returns
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Internal Revenue Service. Determining an Individual’s Tax Residency Status
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eCFR. 26 CFR 20.2105-1 – Estates of Nonresidents Not Citizens
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Office of the Law Revision Counsel. 26 USC 2104 – Property Within the United States
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Office of the Law Revision Counsel. 26 USC 2106 – Taxable Estate
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Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
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Internal Revenue Service. Gift Tax for Nonresidents Not Citizens of the United States
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Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States
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Internal Revenue Service. Instructions for Form 706-NA
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Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
14
Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
15
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
16
Internal Revenue Service. Form 4422 – Application for Certificate Discharging Property Subject to Estate Tax Lien
17
Internal Revenue Service. Transfer Certificate Filing Requirements for the Estates of Nonresidents Not Citizens of the United States
18
Internal Revenue Service. FIRPTA Withholding
19
eCFR. 26 CFR 26.2663-2 – Application of Chapter 13 to Transfers by Nonresidents Not Citizens of the United States
20
Congress.gov. The Generation-Skipping Transfer Tax (GSTT)