Gift tax laws are complicated for all taxpayers — nonresident aliens are no exceptions. In fact, nonresident aliens face several circumstances that provide both challenges and opportunities for them. For example, multiple exemptions to the gift tax for a non-US citizen exist for those who are familiar with the law.

The information presented here is up to date as of 2020, considering the most recent adjustments to the gift tax for resident aliens. If the landscape still appears murky, consult an expert in the field.

NONRESIDENT ALIEN STATUS

If you don’t know whether or not you qualify as a nonresident alien, finding the answer is a logical first step. An alien, for U.S. tax purposes, refers to anyone who is not a U.S. citizen or a U.S. national. U.S. nationals are born in the unincorporated territories of American Samoa or Swains Island.

If you live in the United States, but have not passed the substantial presence or green card test, then you’re qualified as a nonresident. But if you’re married to a resident alien, you may still file your tax return as a U.S. resident alien if you file as “married filing jointly.”

GIFT TAX RULES

The Internal Revenue (IRS) considers any direct or indirect transfer of wealth from one individual to another that has not received some form of equal compensation to be a gift.

Under IRS rules, most gifts are taxable transactions, but there are exceptions, such as:

  • Gifts that fall below the annual gift tax exclusion
  • Spousal gifts
  • Donations to a political organization
  • Medical or tuition expenses paid for someone
  • Donations to qualifying charities

Unless the gift is for a charitable organization, you can’t deduct it from your income tax. The person giving the gift is usually responsible for paying the gift tax. But under some circumstances, the receiver may be permitted to pay it.

The annual gift tax exclusion applies to each gift, so if you have multiple children, you can give them each a gift up to the limit. The annual gift tax rate is $15,000, but it’s double if you’re married and filing jointly: $30,000. This exemption doesn’t apply to nonresident alien spouses. The law only allows this tax exclusion if both spouses are citizens or residents.

VALUE DETERMINATIONS

If the gift does not have a market price associated with it, you need to include copies of an appraisal or other relevant documents pertaining to the transfer. You may also declare the value of the item based on fair market value, which the IRS defines as the price the piece would typically sell for if the exchange took place between two parties that had adequate knowledge and familiarity with the merchandise.

Read more at https://www.cpafirmnyc.com/gift-tax-non-us-citizen

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Miller & Company CPAs: Tax Accountants
Sarasota, Florida
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Sarasota, FL 34237
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