US estate tax on real estate: what your estate owes the IRS

A vacation home on the Gulf Coast, a rental condo in Texas, a plot of land you plan to build on one day. While you are alive, the IRS cares about the rent and the sale. When you die, it cares about the house itself. For people who hold no US passport and do not live in the US, US estate tax starts early, at $60,000, and climbs to 40 percent. This page shows how the numbers work, what the form of ownership changes and what your heirs have to file after a death. For an overview of US estate and gift tax on all types of assets, see US estate tax for non-US citizens.

1The US taxes the estate, not the heir

Many European inheritance taxes hit the heir and depend on how closely related they were to the deceased. The US works differently. Under 26 U.S.C. § 2101, it levies a tax on the transfer of the taxable estate: the estate tax. The estate owes it, it is paid before anything is distributed, and whether the house goes to a daughter, a nephew or a friend makes no difference to the rate.

Your passport alone does not decide which rules apply. For estate tax purposes, you are a US resident if you were domiciled in the US at the time of death. Under 26 CFR § 20.0-1(b)(1), you acquire a domicile in a place by living there, even briefly, with no definite intention of moving away later. So if you live in Florida on a green card and plan to stay, you are taxed like an American: on your worldwide assets, with the full exemption. This page covers the other case: you are not a US citizen and not domiciled in the US. The law then calls you a nonresident not a citizen, and §§ 2101 to 2108 apply to you.

In that case, under § 2103, your estate consists only of the part of your assets located in the US at your death. Your home in Europe, your brokerage account in Stockholm, your bank account in Zurich are none of the IRS's business. The house in the US very much is.

2What belongs to the US estate, and what the mortgage changes

The regulations are clear on real estate. Under 26 CFR § 20.2104-1(a)(1), real property located in the US counts as US-situs property, and so, under (a)(2), does tangible personal property located in the US: the furniture in the vacation home, the boat at the dock, the car in the garage. Add to that, under § 2104(a), shares in a US corporation, no matter where the certificates are kept, and under § 2104(c), debt obligations of US persons. Shares in a company not organized under US law count as property outside the US under § 20.2105-1(f). According to the Instructions for Form 706-NA, deposits with a US bank are not part of the US estate as long as they are not connected with a US trade or business.

A trap for anyone who restructures shortly before death: under § 2104(b), property covered by the transfer rules of §§ 2035 to 2038 counts as located in the US if it was in the US either at the time of the transfer or at death. Putting the house into a revocable trust or keeping the right to live in it does not take it out of the US for estate tax purposes.

The house is valued at its fair market value on the date of death, in the IRS's words the price at which it would change hands between a willing buyer and a willing seller. What you paid back then does not matter.

2.1The mortgage: with or without personal liability

Whether financing lowers the tax depends on what you are personally liable for. Under 26 CFR § 20.2053-7: if the estate is liable for the loan, the house is included at full value and the loan is deducted as a debt. If the estate is not liable, because the lender can only go after the house, only the value net of the loan is included in the first place.

3$60,000: how a $13,000 credit becomes an exemption

The law never states 60,000 as an exemption. § 2102(b)(1) grants the estate of a nonresident not a citizen a credit of $13,000 against the tax. The rate schedule in § 2001(c) starts at 18 percent and at $60,000 produces a tax of exactly $13,000. So up to $60,000 the estate pays nothing; from the first dollar above that, 26 percent; from $80,000, 28 percent; from $100,000, 30 percent; then rising in steps to 40 percent above one million. The table shows the math.

For comparison: under § 2010(c), a US citizen has a basic exclusion amount of $15 million for 2026, indexed for inflation from 2027. A $500,000 house that costs an American neighbor not a cent in estate tax costs the estate of a European without treaty protection $142,800.

Two fine points. First, gifts count: under § 2101(b) and (c), taxable gifts made since 1977 are included in the calculation, and under § 6018(a)(3) they lower the filing threshold. Second, part of the exemption is used up if a gift tax credit was already allowed during your lifetime, § 2102(b)(3)(B). This mainly affects people who were once US residents themselves.

States can levy their own estate or inheritance tax. Federal law accounts for this in § 2106(a)(4) with a pro rata deduction. Florida has not levied its own estate tax for deaths after December 31, 2004. On the US side, estate tax treaties cover federal taxes, not state taxes.

5Switzerland: a different treaty

5.2Switzerland

The treaty between Switzerland and the US, signed on 9 July 1951, entered into force on 17 September 1952. It covers only the federal estate tax and the cantonal estate and inheritance taxes, not gifts. Unlike the newer treaties, it does not allocate taxing rights by type of asset. The US taxes the house under its own law.

Instead, Article III contains a pro rata rule. If the deceased was neither a US citizen nor a US resident, but was a Swiss citizen or resident in Switzerland, the US grants the exemption a resident would have received, or at least the share of it that matches the ratio of the assets taxed in the US to the total estate. So it also applies to a Swiss citizen living outside Switzerland, in Germany for example. Switzerland is on the IRS list. Claims for a credit or refund under the treaty must be filed under Article V within five years of death.

In Switzerland itself, there is no federal inheritance tax. Every canton except Obwalden and Schwyz levies one; the canton where the deceased lived is responsible, and according to the Swiss Federal Tax Administration's overview, real estate is taxed where it is located. How your canton treats a house in the US is set by its own law.

6When your spouse inherits

Between Americans, a spouse inherits tax-free thanks to the unlimited marital deduction. For estates without a US domicile, that only applies in part. § 2106(a)(3) grants the marital deduction on the principles of § 2056, and § 2056(d) rules it out if the surviving spouse is not a US citizen. The exception is property that passes into a Qualified Domestic Trust. Under § 2056A, such a trust needs at least one trustee who is a US citizen or a US company, and the executor must elect it. Distributions from the trust's principal, and whatever is left when the spouse dies, are then subject to estate tax.

7Directly, through an LLC or through a corporation

How you hold the house decides what falls into your estate when you die. The rules are set out in the statute, the regulations and the treaties, and they differ from one form to the next. No structure promises anything without a review of your own situation.

7.1Directly in your own name

The house is US real property and, under § 20.2104-1(a)(1), part of your US estate. Every rule on this page applies directly: the credit, the pro rata deductions and the treaty of your country of residence.

7.2Through an LLC

For federal tax purposes, an LLC is not a fixed type. Under 26 CFR § 301.7701-3(b)(1), a US LLC that makes no election is disregarded as separate from its owner if it has one member, and treated as a partnership if it has several; it can also elect to be taxed as a corporation. For estate tax, neither § 2104 nor § 2105 nor the regulations address interests in partnerships or LLCs. Some treaties are clearer: for an interest in a partnership that holds US real estate, the US may tax the portion attributable to the property (Article 8 of the German treaty, for example). The LLC protects you from liability, but these rules provide no exemption from estate tax.

7.3Through a US corporation

7.4Through a foreign company

Under § 20.2105-1(f), shares in a company not formed under US law count as property outside the US, even if the company owns a house in the US. That is why the US blocker structure places a foreign holding company between you and the US corporation. What each form means for income tax, a sale and liability is compared on the page Holding through an LLC, a blocker corporation or privately; the ongoing taxes are covered under Taxes on US real estate.

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8After a death: Form 706-NA and the transfer certificate

If the US assets, together with taxable gifts made since 1977, exceed $60,000, the executor must file a return under § 6018(a)(2): Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States. Under § 6075(a) it is due nine months after the date of death, and the tax must be paid by the same date. Form 4768 gives an automatic six-month extension for the return, but it does not extend the time to pay.

Who is the executor? According to the Instructions for Form 706-NA, the executor or administrator. If none has been appointed in the US, anyone in possession of the deceased's assets is treated as an executor and must file a return. They have to prove their status, for example with a certified copy of the will or a court order; their own statement is not enough. The return must include the death certificate, the will, valuation appraisals and any earlier US gift tax returns, with English translations of documents in other languages. For the deceased, you enter the Social Security Number, or an ITIN if they already used one for other US returns; otherwise the IRS assigns a separate number.

If you claim a pro rata exemption under a treaty, you show the calculation in an attachment, include Form 8833 and add a copy of the estate tax return filed in the home country. If none was filed there, you explain why and attach a list of the entire estate with values at the date of death.

8.1The transfer certificate

Under 26 CFR § 20.6325-1, a transfer certificate is a document that allows the assets of a nonresident decedent to be transferred free of liability. The IRS issues it once the tax has been paid or secured. It is not needed if the US assets at death did not exceed $60,000, nor for assets administered by an executor appointed in the US. If no Form 706-NA had to be filed, the estate instead sends the will, foreign estate tax returns, the death certificate and a notarized affidavit listing all US assets and their values; the IRS expects 12 to 18 months of processing. Separately, under § 6324(a)(1) the estate tax remains a lien on the estate for up to ten years from the date of death as long as it is unpaid.

8.2When the heirs sell the house

If the estate sells the house, the buyer withholds 15 percent of the proceeds, according to IRS guidance, and reports it on Form 8288. The estate reports the sale on Form 1040-NR and credits the withholding. The gain is usually small: under § 1014 the basis is the fair market value at the date of death. How the sale is taxed overall is covered in Taxes on US real estate.

9Give it away instead of leaving it?

Transferring the house to your children during your lifetime to avoid estate tax only swaps one tax for another. Under § 2511(a), gifts by people without a US passport and without US residence are subject to US gift tax when the property is located in the US, and the house is. The lifetime exemption under § 2505 is available only to US citizens and residents. According to the IRS, for 2026 the first $19,000 per recipient stays tax-free and, for a spouse without a US passport, $194,000. Above that, the donor files Form 709-NA. How gifts across the Atlantic are treated in both directions is covered in Gifts and inheritance across the Atlantic.

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