IRS Form 708: The complete guide to US estate and inheritance tax reporting in 2026

IRS Form 708 is the new federal return for a US citizen, US resident, or certain trust that receives more than $19,000 of covered gifts or bequests from covered expatriates during 2025. The recipient, not the donor or estate, generally calculates a 40% Section 2801 tax and files under the new 18-month deadline.

This return is separate from a decedent estate tax return, Form 706, and from the information-only reporting on Form 3520. A US person receiving foreign inheritance may need more than 1 filing because cross-border inheritance reporting can also include FBAR, Form 8938, or foreign trust disclosures.

The rules became operational after final regulations took effect on January 14, 2025. The IRS final Section 2801 regulations apply to covered gifts and bequests received on or after January 1, 2025, so the first ordinary Form 708 filing cycle extends beyond the 2026 income-tax season.

What is IRS Form 708? A quick answer for US expats

IRS Form 708 is the return a US citizen, US resident, or certain trust uses to report covered gifts or bequests received from a covered expatriate and pay the Section 2801 tax. For 2025, filing generally starts when aggregate covered transfers exceed $19,000.

The official Form 708 from the IRS is a recipient-level return, so it does not replace Form 706, Form 709, or the gift and estate tax unified credit rules that apply to a transferor.

The Section 2801 regime is a targeted expatriation rule, not a general IRS inheritance-tax filing for every foreign inheritance. Our guide to estate taxes for expatriates explains the wider worldwide estate tax obligations that can exist before Form 708 is considered.

For a 2025 receipt, the IRS instructions for Form 708 aggregate covered gifts and bequests across all covered expatriates for the calendar year. The $19,000 Section 2801(c) amount is subtracted once on the recipient’s annual return, not once for each donor, asset, or transfer.

Why the IRS created Form 708

Congress enacted Section 2801 in 2008 to tax certain gifts and bequests that covered expatriates make to US recipients, but the operative regulations arrived 17 years later. Final rules took effect January 14, 2025, and Form 708 applies to covered transfers received on or after January 1, 2025.

The 17-year gap between the 2008 HEART Act and the 2025 effective date explains why Form 708 first appeared in the 2026 filing environment. The IRS Instructions for Form 708 describe the new annual return, the recipient-based tax, and the separate timing rules for gifts, bequests, and trusts.

Section 2801 closes a gap created when a covered expatriate is no longer fully subject to US gift and estate taxation. It shifts the tax to the US recipient and sits outside the normal annual gift tax exclusion and estate tax exemption amounts used for Form 709 or Form 706.

 

 

Foreign gifts outside Section 2801 may still create Form 3520 reporting. See how foreign gift tax and information reporting work for US expats before treating a pre-2025 transfer as report-free.

Who is a covered expatriate? The three-part test

A person is generally a covered expatriate if 1 of 3 tests applies on the expatriation date: a $2 million net-worth test, a 5-year average income-tax-liability test of more than $206,000 for 2025, or failure to certify 5 years of federal tax compliance on Form 8854.

A person who meets any one of these three thresholds on their expatriation date is classified as a covered expatriate under US tax law. For expatriations in 2026, the average annual net income tax liability threshold rises to $211,000, while the $2 million net-worth test remains unchanged.

The following 3 tests determine covered-expatriate status for most individuals under Sections 877A(g)(1) and 2801:

1. Net-worth test: The person’s net worth is $2 million or more on the expatriation date.
2. Tax-liability test: The person’s average annual net income tax liability for the prior 5 tax years exceeds $206,000 for a 2025 expatriation or $211,000 for a 2026 expatriation.
3. Certification test: The person does not certify on Form 8854 that all federal tax obligations were met for the 5 preceding tax years.

The IRS Form 8854 page provides the form used to document expatriation tax consequences. Long-term residents can fall under the same rules when they end US residency after holding a green card in at least 8 of the prior 15 tax years, subject to statutory and treaty details.

A missing Form 8854 can create covered-expatriate status even when net worth and tax liability are below the dollar tests. Taxpayers correcting older international filings should review TFX’s guide to delinquent international information return procedures before assuming a late certification cures the issue.

 

What is a covered gift or bequest under IRC §2801?

A covered gift is a lifetime transfer from a covered expatriate to a US recipient, while a covered bequest is property acquired from that person at death. For 2025, aggregate covered transfers above $19,000 can trigger Form 708 unless a statutory exclusion applies.

Any property received from a covered expatriate – whether as a gift during their lifetime or an inheritance after death – may trigger the §2801 tax if it exceeds the annual exclusion. The recipient reports fair market value on the date of receipt, which may differ from the decedent’s date of death.

The following 4 categories separate commonly covered transfers from transfers excluded under the final regulations:

• Usually covered: Cash, securities, real estate, business interests, and other property transferred directly by a covered expatriate.
• Usually covered through a trust: Property received by a domestic trust, or certain distributions from a foreign trust attributable to covered gifts or bequests.
• Excluded when already reported for US transfer tax: A gift timely reported on Form 709 or property included on a timely Form 706 and subject to the applicable US gift or estate tax rules.
• Excluded by recipient or purpose: Qualifying transfers to a US-citizen spouse, qualifying charitable transfers, and property refused through a qualified disclaimer.

The $19,000 Section 2801(c) amount is not a $19,000-per-transferor allowance. It is an annual amount applied once against the recipient’s aggregate covered gifts and bequests, a key difference from ordinary IRS gift rules and the annual gift tax exclusion.

The IRS Instructions for Form 708 define each exclusion and require supporting documents. TFX also explains the IRS’s revised approach to foreign gift and inheritance filing penalties, which applies to Form 3520 rather than replacing Form 708.

How the §2801 tax is calculated: Rates and thresholds

Section 2801 tax equals 40% of aggregate covered gifts and bequests received during the calendar year after subtracting the $19,000 Section 2801(c) amount for 2025. Qualifying foreign gift or estate tax paid on the same transfer can reduce the US tax when proof is attached.

The §2801 tax rate is set at 40% – the same as the top federal estate and gift tax rate – applied to the fair market value of covered transfers exceeding the annual exclusion. The computation uses the value when the recipient receives the property, not the transferor’s original basis.

For 2025, subtract $19,000 once from the annual covered-transfer total, apply 40%, and then subtract allowable foreign gift or estate tax.

 

Based on our client scenario at TFX: A US resident receives a $500,000 covered bequest in 2025. The preliminary tax is $192,400: $500,000 minus $19,000 equals $481,000, and $481,000 multiplied by 40% equals $192,400 before any qualifying foreign-tax reduction.

This calculation does not use the decedent’s gift and estate tax unified credit, portability election for a deceased spouse, or generation-skipping transfer tax exemption. Those concepts belong to the transferor-side estate and gift tax system; Section 2801 imposes a separate recipient-side tax.

For broader 2026 planning, TFX’s guide to estate and gift tax changes under the 2025 tax law explains the $15 million basic exclusion amount for 2026. That increase does not raise the $19,000 Section 2801(c) amount for 2025 or 2026.

Who must file Form 708: Filing obligations explained

The filing duty falls on the US recipient when 2025 aggregate covered gifts and bequests exceed $19,000. Individuals who are US citizens or US residents under the Section 2801 domicile test, domestic trusts, migrated foreign trusts, and electing foreign trusts can have Form 708 obligations.

The filing obligation for Form 708 falls entirely on the US recipient, not the person who made the gift or bequest. An executor may provide records, but executor responsibilities for estate taxes do not shift the Section 2801 liability away from the beneficiary or trust treated as the US recipient.

The following 4 recipient categories should test a Form 708 filing obligation:

• US citizens: Including citizens living abroad who receive covered property.
• US residents for Section 2801: Determined under a domicile-based transfer-tax standard, not solely the income-tax substantial-presence test.
• Domestic trusts: The trust files and pays before later distributions are considered.
• Certain foreign trusts: Migrated foreign trusts and foreign trusts electing domestic treatment have special filing rules; beneficiaries of non-electing foreign trusts may owe tax when they receive attributable distributions.

A decedent estate tax return is filed by an executor for the estate, but Form 708 is filed by the recipient. This distinction matters when estate tax filing requirements, foreign beneficiary tax obligations, and Section 2801 all appear in the same administration.

The trust classification analysis can change who files and when. Review TFX’s explanation of what counts as a foreign trust for US tax purposes before assigning the Form 708 duty to a trustee or beneficiary.

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Form 708 due date and filing deadline

A 2025 Form 708 is generally due June 15, 2027 – the 15th day of the 18th month after the calendar year closes. A timely Form 7004 provides an automatic 6-month filing extension to December 15, 2027, but does not extend the tax-payment deadline.

This is not an April 15 income-tax deadline. The current IRS Form 708 instructions give the June 15, 2027 example expressly, so a beneficiary should not attach Form 708 to a 2025 Form 1040 or assume the 2026 income-tax extension controls.

The following 4 timing rules cover the ordinary return and the main exceptions:

• General 2025 receipt: File by June 15, 2027.
• Covered bequest received after the death year: Use the later of the 18-month rule measured from the death year or the 6-month rule measured from the receipt year.
• Migrated foreign trust: File by the 15th day of the 6th month after the migration year, so a 2025 migration is generally due June 15, 2026.
• Electing foreign trust with no covered receipt: File by the 15th day of the 6th month after the election year.

 

 

Collect probate statements, appraisals, trust ledgers, and transfer confirmations well before the 18-month date. TFX’s guide to tax documents for US returns from countries with no personal income tax provides a useful document-collection model, even though Form 708 has its own filing date.

How to complete Form 708: Part-by-part walkthrough

The December 2025 Form 708 has 8 parts, not 4. It moves from recipient information and the 40% tax calculation to transferor identification, covered-property schedules, foreign-tax reductions, foreign-trust computations, trust elections, and signed consents or affirmations for individuals and trusts.

Accurately identifying the covered expatriate on Form 708 is critical – Part III requests the transferor’s name, expatriation date, identifying number if known, and date of death when applicable. The return also requires transaction-level values and supporting statements.

The following 8 parts make up the current Form 708:

1. Part I – General information: Identifies the recipient and the calendar year covered.
2. Part II – Tax computation: Totals covered transfers, subtracts the $19,000 Section 2801(c) amount, applies 40%, and accounts for foreign-tax reductions and payments.
3. Part III – Covered expatriates: Lists each transferor and the known expatriation, identification, and death details.
4. Part IV – Covered gifts and bequests: Reports each property item, date of receipt, fair market value, and supporting description.
5. Part V – Foreign gift or estate tax: Computes the allowable reduction and requires evidence of the foreign liability and payment.
6. Part VI – Non-electing foreign trusts: Calculates the portion of a distribution attributable to covered transfers using the Section 2801 ratio.
7. Part VII – Foreign-trust agent and election information: Supplies US-agent details and data for an electing foreign trust.
8. Part VIII – Consents and affirmations: Records required agreements, authorizations, and declarations.

Do not import data blindly from a decedent estate tax return. Form 708 uses the recipient’s date of receipt, while Form 706 may use date-of-death or alternate valuation data; generation-skipping transfer tax and portability election for a deceased spouse also follow separate forms and rules.

Where a foreign trust is involved, the Form 708 schedules must agree with Form 3520 records. TFX’s guide to relief from Forms 3520-A and 3520 for certain tax-favored foreign trusts explains a narrow reporting exception, not a blanket Form 708 exemption.

Identifying whether your transferor is a covered expatriate

The recipient bears the status-check burden, even when the transferor will not share tax records. For a 2025 return, request at least 4 categories of evidence: the expatriation date, Form 8854 certification, net worth at expatriation, and 5-year US tax-compliance records.

The following 4 records can support the covered-expatriate determination:

• A copy of the transferor’s Form 8854 or the relevant certification pages.
• A passport, certificate of loss of nationality, green-card abandonment record, or other evidence fixing the expatriation date.
• A balance sheet or appraisal showing whether net worth reached $2 million.
• Tax transcripts, filed returns, or adviser confirmation covering the 5 years before expatriation.

The final regulations permit limited IRS disclosure under Section 6103 in specified circumstances. A living transferor who refuses the required authorization can face a presumption that the transfer is covered, so silence should not be treated as proof that Form 708 is unnecessary.

A protective Form 708 may start the limitations period when it is complete, signed under penalties of perjury, and includes the required affidavit and supporting information. It is not automatically the safest option in every case because an incomplete protective return may fail to start that period.

Historical enforcement examples involving foreign banks disclosing US account information show why document trails matter, but covered-expatriate status still turns on Sections 877A and 2801 rather than bank disclosure alone.

Covered transfers through trusts: Special rules

A domestic trust that receives a covered gift or bequest is treated as the US recipient and generally files Form 708 itself. For a non-electing foreign trust, the US beneficiary can owe Section 2801 tax when a distribution attributable to covered transfers is received.

The trust rules divide responsibility between 2 systems. A domestic or electing foreign trust bears the tax at the trust level, while foreign trust distributions from a non-electing trust can shift the computation to the US beneficiary through the Section 2801 ratio.

The following 3 trust paths determine the filing result:

• Domestic trust: Reports the covered receipt and pays Section 2801 tax before ordinary beneficiary distributions.
• Non-electing foreign trust: Tracks covered-transfer amounts and supplies information so a US beneficiary can report the attributable distribution.
• Electing foreign trust: Files Form 708, appoints a US agent, agrees to IRS access and collection rules, and takes on domestic-trust treatment for Section 2801.

Trust reporting requirements for expats can overlap with Form 3520, Form 3520-A, and income-tax rules. Read TFX’s guide to foreign grantor trusts before assuming that grantor-trust status answers the Section 2801 question.

Penalties for failing to file or pay: What you risk

Form 708 is subject to Section 6651 additions to tax. Late filing can add 5% of unpaid tax per month up to 25%, while late payment can add 0.5% per month up to 25%; interest also runs from the original payment due date.

Missing the June 15, 2027 general deadline for a 2025 Form 708 can expose unpaid Section 2801 tax to a late-filing addition of up to 25%, plus late-payment additions and interest. The exact amount depends on tax due, delay length, concurrent penalties, and any reasonable-cause relief.

The following 4 penalty categories can arise, depending on the facts:

• Failure to file: Generally 5% per month or part of a month, capped at 25% of unpaid tax under Section 6651(a)(1).
• Failure to pay: Generally 0.5% per month or part of a month, capped at 25% under Section 6651(a)(2), with coordination rules when both additions apply.
• Accuracy-related penalty: Generally 20% of the underpayment attributable to negligence, disregard of rules, or another listed ground when Section 6662 applies; some valuation cases can carry a 40% rate.
• Fraud: A filed return with an underpayment attributable to fraud can face a 75% civil fraud penalty under Section 6663; fraudulent failure to file has a separate Section 6651(f) rule.

Reasonable cause can excuse Section 6651 additions when the taxpayer shows the failure was not due to willful neglect. The IRS instructions say to respond after receiving a penalty notice rather than attaching a reasonable-cause statement to the original Form 708.

Good-faith investigation matters when transferor status is unclear. Keep written requests, adviser correspondence, valuation files, and the facts used to decide whether a protective return was appropriate.

Form 708 vs. Form 3520: Understanding the difference

Form 708 imposes a 40% recipient tax on covered transfers from covered expatriates, while Form 3520 is an information return for specified foreign gifts, bequests, and trust transactions. A single 2025 transfer can require both forms because their triggers, thresholds, and deadlines are different.

Form 3520 reports foreign gifts and inheritances for informational purposes only, while Form 708 imposes an actual tax liability on covered transfers from expatriates. Form 3520 does not calculate Section 2801 tax, and filing it does not replace Form 708.

For a 2025 transfer, Form 3520 usually follows the income-tax return deadline, while ordinary Form 708 reporting is generally due June 15, 2027.

 

Both forms can apply when a covered expatriate is also a foreign person and the transfer exceeds the Form 3520 reporting threshold. A US beneficiary receiving a foreign trust distribution may also need to reconcile the trust statement, Form 3520 Part III, and Form 708 Part VI.

Cross-border inheritance scenarios: Common TFX client examples

The following 3 TFX client scenarios show how the $19,000 annual amount, 40% tax rate, trust classification, and foreign-tax reduction change the result. Each scenario assumes the transfer is covered and uses 2025 values before considering treaty positions or other fact-specific exclusions.

1. Based on our client scenario at TFX: A US citizen receives a $300,000 bequest from a covered expatriate parent in Canada. The preliminary Section 2801 tax is $112,400: ($300,000 − $19,000) × 40%, before reducing the amount for qualifying Canadian estate or inheritance tax paid.
2. Based on our client scenario at TFX: A US green card holder receives a $50,000 covered gift from a sibling in Germany. The preliminary tax is $12,400: ($50,000 − $19,000) × 40%, assuming no other covered transfers and no allowable foreign-tax reduction.
3. Based on our client scenario at TFX: A domestic trust receives $1 million from a covered expatriate’s estate. The trust, not its later US beneficiaries, generally files Form 708 and pays Section 2801 tax before making ordinary distributions.

In each scenario, the US recipient computes Section 2801 tax, but qualifying foreign gift or estate tax paid on the same transfer can reduce the amount due. The reduction requires a copy of the foreign return and proof of payment, so “regardless of foreign tax” is not the correct rule.

A US person receiving foreign inheritance must separate recipient-level Section 2801 from executor responsibilities for estate taxes and the decedent estate tax return. TFX’s guide to federal estate tax for non-US investors explains the transferor-side rules for US-situs assets.

These examples also show why tax and inheritance questions involving the IRS cannot be answered from the asset’s country alone. The transferor’s expatriation status, the recipient’s US status, trust classification, receipt date, foreign tax paid, and property value all matter.

Estate tax treaty benefits and Form 708: Does a treaty help?

The United States has estate or gift tax treaties with 17 countries, but treaty relief for a transferor-side estate tax does not automatically remove the recipient-side Section 2801 tax. No current IRS guidance provides a blanket treaty exemption from Form 708 for 2025 covered transfers.

Estate tax treaty benefits can still affect domicile, taxing rights, deductions, credits, and the amount of foreign tax paid. The IRS estate and gift tax treaty list covers Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom.

Section 2801 Part V separately reduces tax for qualifying foreign gift or estate tax paid on the covered property. That reduction is not the income-tax Foreign Tax Credit claimed on Form 1116, so use TFX’s Form 1116 guide only to distinguish the 2 credit systems.

Treaty wording and domestic law must be reviewed country by country. A treaty may influence the estate’s foreign liability or domicile analysis without changing who files Form 708.

FBAR and FATCA reporting for inherited foreign assets

An inherited foreign account can create FBAR reporting once the US recipient has a financial interest or signature authority and aggregate foreign accounts exceed $10,000. Form 8938 can also apply when specified foreign financial assets cross thresholds ranging from $50,000 to $600,000.

Receiving a foreign inheritance that includes overseas bank accounts can simultaneously trigger Form 708, FBAR, and Form 8938 filing obligations in the same tax year. The forms measure different interests and values, so one filing does not satisfy the others.

The following 5 thresholds cover the most common individual filing positions:

• FBAR: More than $10,000 in aggregate foreign financial accounts at any time during the calendar year.
• Form 8938 – single or married filing separately, living in the US: More than $50,000 at year-end or $75,000 at any time.
• Form 8938 – married filing jointly, living in the US: More than $100,000 at year-end or $150,000 at any time.
• Form 8938 – single or married filing separately, living abroad: More than $200,000 at year-end or $300,000 at any time.
• Form 8938 – married filing jointly, living abroad: More than $400,000 at year-end or $600,000 at any time.

Foreign bank account reporting for estates depends on who owns or controls the account during administration. An expectation of inheritance does not by itself create an FBAR interest, but ownership, authority, or a trust role can change the answer.

TFX’s FBAR filing guide for foreign accounts explains the $10,000 aggregate test, filing system, and annual deadline. Form 8938 is filed with the income-tax return, while FBAR goes separately to FinCEN.

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Basis step-up rules for inherited assets under Form 708

Property received as a covered bequest uses Section 1014 when it qualifies as property acquired from a decedent, while a covered gift generally follows Section 1015 carryover-basis rules. The Section 2801 tax paid does not increase basis under the final regulations.

Basis step-up rules for inherited assets depend on Section 1014, not on whether Form 708 tax was paid. A direct bequest, devise, or inheritance can receive date-of-death fair market value basis, while some lifetime trust transfers remain outside Section 1014.

The final Section 2801 regulations state that Section 2801 tax does not create a special basis increase. They direct recipients to Sections 1014 and 1015, and expressly deny a Section 1015(d) increase for tax paid on a covered gift.

Based on our client scenario at TFX: A US beneficiary pays $80,000 of Section 2801 tax on inherited foreign real estate. The $80,000 is not added to basis; the beneficiary must determine whether Section 1014 applies and separately document fair market value and later capital improvements.

IRS Revenue Ruling 2023-2 confirms that an irrevocable grantor trust asset not included in the deceased grantor’s gross estate does not receive a basis adjustment solely because the grantor died. TFX’s guide to US reporting for foreign rental property covers depreciation, currency conversion, and later sale reporting.

FIRPTA concerns US real property interests disposed of by foreign persons; it does not govern a US beneficiary’s sale of foreign real estate. The relevant sale rules instead depend on US capital-gain, basis, currency, and foreign-tax-credit facts.

Expatriate planning strategies to reduce §2801 exposure

Section 2801 planning must occur before the expatriation date and should address 4 areas: pre-expatriation transfers, charitable or spousal exclusions, 5-year tax compliance, and trust design. For 2025, the ordinary annual gift exclusion is $19,000 and the basic exclusion amount is $13.99 million.

The most reliable planning step is to model transfers and covered-expatriate status before expatriation, rather than trying to recharacterize a gift after the date is fixed. Form 8854 documents the result but does not necessarily establish the legal expatriation date.

The following 4 strategies require individualized legal and tax review:

1. Model gifts before expatriation: The 2025 annual gift tax exclusion is $19,000 per recipient, and the 2025 basic exclusion amount is $13.99 million. Pre-expatriation gifts can use ordinary gift-tax rules, but Form 709, generation-skipping transfer tax, valuation, and state-law issues may apply.
2. Use qualifying spouse or charity transfers: Section 2801 excludes certain transfers that qualify for marital or charitable treatment. The recipient, citizenship, trust form, and documentation must fit the statutory conditions.
3. Complete the 5-year compliance review: Accurate returns and Form 8854 certification can prevent covered status under the certification test, though the $2 million and tax-liability tests remain separate.
4. Review trusts before funding: An irrevocable trust does not automatically remove expatriate gift tax considerations. Domestic, foreign, grantor, non-grantor, electing, and non-electing structures have different Section 2801 and trust reporting requirements for expats.

For 2026 transfers under ordinary estate and gift rules, the basic exclusion amount is $15 million and the annual gift tax exclusion remains $19,000. Those estate tax exemption amounts do not change the separate $19,000 Section 2801(c) amount.

Expatriate estate planning should also address worldwide estate tax obligations, beneficiary residence, local succession law, foreign trust distributions, and estate tax treaty benefits. The right sequence depends on the person’s nationality, domicile, assets, family structure, and intended expatriation date.

File Form 708 with a documented compliance path

A recipient reporting a 2025 covered transfer generally has until June 15, 2027, but valuation, status, trust, and foreign-tax records can take months to obtain. Starting before the deadline gives the preparer time to reconcile Form 708 with Form 3520, FBAR, Form 8938, and estate records.

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