Nonresident Estate Tax on US Real Estate: $60,000, Form 706-NA

The $60,000: filing line, credit and exemption are three different things

Most pages call it “the $60,000 exemption.” The Code does not. Three separate rules each produce a figure that looks like it, and they come apart as soon as there is a mortgage, a gift or a treaty.

The credit is written as a flat dollar amount: “A credit of $13,000 shall be allowed against the tax imposed by section 2101.” The IRS page for nonresidents adds a sentence that matters for planning: “The filing threshold for Form 706-NA is not indexed for inflation.” A $60,000 line set in the 1980s therefore buys less every year, while the U.S. person’s exclusion was raised to $15,000,000 for 2026 (see our guide to the 2026 estate tax exemption).

Two details the top-ranking summaries skip. First, the filing test looks at the gross estate, before debts. A property worth $70,000 with a $65,000 mortgage is still over the line, because the test in section 6018(a)(2) is about the part of the gross estate situated in the United States, and the debt comes off later in the computation. Second, the Treasury regulation on who must file, 26 CFR 20.6018-1(b)(1), still prints a $30,000 figure for deaths after November 13, 1966. The statute reads $60,000 and the IRS uses $60,000, so the regulation text is out of date on this one number. The IRS statistics page words the line as “$60,000 or more,” while the Code and the instructions say “exceeds”; the Code controls.

Who is a “nonresident”: domicile, not green cards or income tax residence

The test is domicile, not days in the country. The Instructions for Form 706-NA say “a person acquires domicile in a place by living there, for even a brief period of time, with no definite present intention of later moving.” A decedent is a nonresident not a citizen (NRNC) if neither domiciled in nor a citizen of the United States at death, and the instructions add a warning: “A decedent may be a U.S. resident for income tax purposes yet be considered a nonresident for estate tax purposes.” This page covers only the NRNC. Decedents who are U.S. citizens or domiciliaries file Form 706 (see our Form 706 instructions guide).

What the tax really is: the 2026 rate table, not a flat 40%

Section 2101(b) computes the NRNC’s tax from a tentative tax “under section 2001(c)” on the taxable estate plus adjusted taxable gifts, less the tentative tax on adjusted taxable gifts. The schedule in 2001(c) is the one used for U.S. persons. It was not changed for 2026; what changed is the $15,000,000 exclusion that a U.S. person subtracts. Here is the whole table as it reads in the Code today.

Form 706-NA is built to follow that order. Part II takes the taxable estate (line 1), adds U.S. taxable gifts made after 1976 (line 2), finds the tentative tax on both (line 4) and on the gifts alone (line 5), and subtracts to get the gross estate tax (line 6). Line 7 is the unified credit, and the instructions say it is allowed for “the smaller of the line 6 amount or the maximum unified credit,” which is generally $13,000. Here is what that gives for a taxable U.S. estate with no gifts and no treaty.

All amounts in the table are our arithmetic from 26 U.S.C. 2001(c) and 2102(b)(1). The last column is our arithmetic too: each amount is under the $15,000,000 basic exclusion, so a U.S. citizen or domiciliary owes no federal estate tax on it (26 U.S.C. 2010(c)). Assumes no deductions, no gifts and no treaty.

The effective rate climbs toward 40% but never reaches it. The first dollar above $60,000 is taxed at 26%, and every dollar above $1,000,000 at 40%. For the owner of a $400,000 rental with no other U.S. assets, the tax is $108,800 (our arithmetic: tentative tax $121,800 less the $13,000 credit), not $136,000, which is 40% of the $340,000 above $60,000.

Our own page on international crowdfunding investors says non-U.S. persons face “a U.S. estate tax of 40% on US assets above just $60,000” and that a $200,000 portfolio leaves $140,000 exposed to 40%, “a $56,000 tax bill.” That is not what the Code computes. The tentative tax on $200,000 is $54,800, the credit is $13,000, and the tax is $41,800 (our arithmetic), which is 20.9% of the estate and about 30% of the part above $60,000. The $60,000 and the “nothing owed under $60,000” are right; the flat 40% is not.

What is “U.S.-situs”: the line that decides the bill

Only property situated in the United States is in the NRNC’s gross estate for this tax (26 U.S.C. 2103), but the decedent’s whole worldwide estate still goes on the return, because the deductions depend on it. The situs rules are in 26 U.S.C. 2104 and 2105 and 26 CFR 20.2104-1 and 20.2105-1. The table lists the items a real estate or crowdfunding investor is likeliest to hold.

The last row is the gap. The statute names stock and debt; the regulation’s list includes a catch-all for intangible property “issued by or enforceable against a resident of the United States or a domestic corporation,” and a separate entry in 20.2105-1(e) puts the opposite kind outside the United States. Neither text mentions a partnership or an LLC, and the Instructions for Form 706-NA say only that shares of a U.S.-organized corporation are in and other shares are out. Practitioners cite a 1955 revenue ruling about a partner’s interest, but we did not read it, so we do not rely on it, and we found no primary text that settles the point for a single-member LLC that the income tax ignores. Anyone who holds U.S. real estate through an LLC and counts on its estate tax result should have a cross-border tax lawyer put the answer in writing.

Joint ownership is a further trap. The instructions say the gross estate generally includes the full value of property held as joint tenants with right of survivorship, and only half where the surviving spouse is a U.S. citizen, with exceptions explained in the Schedule E instructions of Form 706. On that rule a foreign couple who hold a U.S. condo jointly with survivorship generally have the full value in the first-dying spouse’s estate unless the survivor is a U.S. citizen.

Deductions are prorated, and you must show the whole world

An NRNC estate does not subtract mortgages the way a U.S. estate does. Section 2106(a)(1) allows only “that proportion” of the expense and debt deductions that the U.S. gross estate bears to the entire gross estate, and Form 706-NA does this on its face: Part IV line 5 is line 1 divided by line 3, and line 6 is line 5 multiplied by line 4. The regulation adds that it does not matter whether the debt was incurred inside or outside the United States, and that no deduction is allowed unless the return discloses the whole estate (26 CFR 20.2106-2(a)(2); 26 U.S.C. 2106(b)).

Here is a case, our arithmetic. A decedent’s worldwide gross estate is $4,000,000, of which $1,500,000 is a U.S. rental property carrying a $600,000 mortgage; nothing else is deducted.

The proration moves the bill by $149,000 in this case (our arithmetic). The instructions also tell the filer to document line 2, the gross estate outside the United States, with a certified copy of the foreign death tax return or the foreign inventory, so the return is also a disclosure of the non-U.S. assets. Whether non-recourse debt is treated as a deduction or as a reduction in the property’s value is a separate valuation question that we did not research and that a preparer should settle.

Treaties: what the primary text says and what we did not read

The instructions list death tax treaties with Australia, Austria, Canada (through Article XXIX B of the income tax treaty), Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, South Africa, Switzerland and the United Kingdom. They add that, when the form went to print, treaties with Australia, Canada, Finland, France, Germany, Greece, Italy, Japan and Switzerland contained provisions to which section 2102(b)(3)(A) applies. We did not read the treaty texts themselves, so we do not state any country’s rule; we only describe the mechanisms as the instructions and the Code present them.

Mechanism one is the pro rata credit. Section 2102(b)(3)(A) says that, to the extent a treaty requires it, the credit equals the applicable credit amount for the year of death times the ratio of the U.S. gross estate to the entire gross estate. For a 2026 death the applicable credit amount is the tentative tax on $15,000,000, which is $5,945,800 (our arithmetic: $345,800 plus 40% of $14,000,000). A treaty-country decedent with a $5,000,000 worldwide estate and $1,500,000 in U.S. real estate would then have a credit of $1,783,740 ($5,945,800 times 1.5 over 5), against a tentative tax of $545,800, so the U.S. tax is zero (our arithmetic). If the same decedent’s U.S. estate were 100% of a $1,500,000 worldwide estate, the ratio is 1 and the credit is the whole $5,945,800. The relief shrinks as more of the wealth is outside the United States.

Mechanism two is a cap or an exemption written for one country. The instructions describe a Canadian small-estate relief for a worldwide estate of not more than $1,200,000 and a Canadian marital credit; and for a U.K. national who was neither domiciled in nor a national of the United States, a limit under Paragraph 5 of Article 8 of that treaty: “The tax may not exceed the U.S. estate tax that could have been imposed on the decedent’s worldwide assets had the decedent died domiciled in the United States.”

Claiming any of this has paperwork. The IRS FAQ says to attach Form 8833 to show the position is treaty-based, to show the pro rata credit computation, and to attach a copy of the return filed with the treaty partner, or to explain why none was due. Treaty returns are also a distinct population in the IRS data below: in 2014 there were three treaty returns for every non-treaty return.

Holding structures, described without a recommendation

Foreign owners often ask whether the way they hold U.S. real estate changes the estate tax. The Code gives the estate tax answer for some structures and is silent on others, and every route has other taxes. The table keeps the two apart. It is a description of what the sources we read say, not a suggestion to use any structure.

What the table does not tell you is how a tax authority would treat any structure built mainly to avoid this tax, or the cost of keeping a company; those are questions for a cross-border tax lawyer who will read the facts. What it does show is that the trade is real and two-sided: removing the property from the U.S. estate moves taxes to the corporate level, to the branch profits line and to the sale, and the saving or loss depends on how long the property is held and what it earns.

Filing Form 706-NA: what the executor does

Form 706-NA (Rev. August 2025) is three pages for decedents dying after December 31, 2024. The instructions say to complete it in this order: Part I (decedent, executor, attorney), Part III (general information), Part V (gross estate in the United States), Part IV (taxable estate), then Part II (tax). The filer also needs Form 706 and its instructions, because Schedules M, O, U and Q are attached from that form and Table A for the tentative tax comes from its instructions.

The transfer certificate row is a practical warning for heirs who inherit a modest U.S. property. The IRS page says a transfer certificate is not required for property administered by an executor appointed, qualified and acting within the United States, so a U.S. probate can avoid the step; if the estate is under the $60,000 line and no U.S. executor is appointed, the IRS describes a separate request with an affidavit. In both cases the instructions are explicit that “Unnecessary use of the Form 706-NA will delay the issuance of a Transfer Certificate.”

After death: selling the property, FIRPTA and state taxes

If the estate sells a U.S. real property interest, the IRS FAQ says the estate reports any gain or loss, the buyer is required to withhold 15% of the amount realized unless an exception applies, and the buyer files Form 8288 by the 20th day after the transfer. The estate then files Form 1040-NR and attaches Form 8288-A to claim credit for what was withheld. Because the heirs’ basis is generally the date-of-death value (section 1014, as the IRS FAQ explains), a quick sale at that value usually leaves little or no gain, while the 15% is taken from the price anyway. Our FIRPTA guide has the 10% and 0% price bands, the residence test and the Form 8288-B certificate that can lower the withholding.

State death taxes are a separate layer and they follow the property. Form 706-NA allows a deduction for state death taxes paid on U.S. property, computed by a fraction of the property subject to state tax over the U.S. gross estate (26 U.S.C. 2106(a)(4); instructions, line 8). Which states tax a nonresident owner, and from what dollar amount, is in our state estate and inheritance tax list, with single-state guides such as Washington and Hawaii, where the state exclusion can be far above $60,000 or far below the federal $15,000,000.

What the IRS data shows: 849 returns filed in 2014

The IRS Statistics of Income division has published tables on Form 706-NA returns, split into non-treaty and treaty returns. The newest tables on the IRS page we read are for returns filed in 2014 (published June 2015); we found no later year. They are old, so treat them as a picture of who files, not of today’s volumes. “Real estate” in the tables includes real estate partnerships, mutual funds that are mainly real estate, and REITs.

By size, the non-treaty returns split 41, 118 and 55 across the bands “less than $100,000,” “$100,000 under $500,000” and “$500,000 or more” of U.S. gross estate, and the treaty returns 133, 385 and 117. In both groups the band of $500,000 or more carried most of the dollars: $97,916,586 of the non-treaty U.S. gross estate and $200,192,141 of the treaty U.S. gross estate. Foreign wealth dwarfs the U.S. slice: the non-U.S. gross estate was about three times the U.S. gross estate for non-treaty returns and about five times for treaty returns (our arithmetic). That is why the proportional deductions and the pro rata treaty credit matter in practice. The tables do not say which structures the decedents used.

What a reader can do with this

1. Add up everything that can be U.S.-situs. Land, a house, shares in U.S. corporations including a REIT organized as a corporation, notes of U.S. issuers, a share of jointly owned property and gifts made within three years of death all count toward the $60,000 (26 U.S.C. 2104; 26 CFR 20.2104-1). Bank deposits not used in a U.S. business, life insurance on your life and foreign-company shares generally do not.
2. Put a number on it using the table above. Pick the nearest row, then adjust for the mortgage with the line 5 fraction. A $1,000,000 U.S. estate costs $332,800 and a $3,000,000 one $1,132,800 before deductions (our arithmetic).
3. Find out whether your country’s treaty is on the instructions’ list, and read it. Only the treaty text, not a summary, says whether you get a pro rata credit, an exemption or nothing. Keep your treaty country’s own estate or inheritance tax return rules in mind, because Form 8833 and a copy of that return go with a treaty claim.
4. Ask who your U.S. executor will be before it matters. The IRS describes an executor “appointed, qualified and acting within the United States” as the case in which a transfer certificate is not required, and an executor with documents in hand is how a nine-month deadline is met.
5. Check the marital plan. The marital deduction requires a U.S.-citizen spouse or a QDOT, and portability is not available to a nonresident (Instructions for Form 706-NA; IRS FAQ). A non-citizen surviving spouse who inherits U.S. property outright does not shelter it.
6. Do not decide a holding structure from a web page, including ours. The table shows the estate tax result alongside income tax, branch tax, FIRPTA and gift tax. The right answer depends on your country, your heirs and your holding period.

The decision with real money in it is whether, how and where to hold U.S. property when your estate tax allowance is $60,000, and the people who can read your documents are a cross-border tax attorney or CPA in the United States and, where relevant, in your home country. The box below is a referral to financial advisers for readers who also want to look at how their U.S. holdings fit the rest of their wealth; it does not replace the attorney or the CPA.

FAQ

Sources, read and saved on October 29, 2026: 26 U.S.C. 11, 884, 897, 2001, 2010, 2101, 2102, 2103, 2104, 2105, 2106, 2107, 2501, 2511, 6018 and 6075 (Legal Information Institute, Cornell Law School); 26 CFR 20.2101-1, 20.2102-1, 20.2103-1, 20.2104-1, 20.2105-1, 20.2106-1, 20.2106-2, 20.6018-1, 20.6018-3, 20.6018-4 and 20.6075-1 (same source); Form 706-NA (Rev. August 2025) and the Instructions for Form 706-NA (Rev. 09/2025) on irs.gov; the IRS pages “Estate tax for nonresidents not citizens of the United States,” “Frequently asked questions on estate taxes for nonresidents not citizens of the United States,” “Gift tax for nonresidents not citizens of the United States,” “Transfer certificate filing requirements for the estates of nonresidents not citizens of the United States” and “Estate and gift tax treaties (international)”; IRS Statistics of Income Tables 1 and 2 for nonresident alien estate tax returns filed in 2014 (files 14es01nt.xlsx and 14es01tr.xlsx, June 2015); and Rev. Proc. 2025-32 section 2.14. We did not read any tax treaty text, Rev. Rul. 55-701, or the section 871(h) conditions; statements about them are limited to what the sources above say. Every tax amount is our arithmetic from the section 2001(c) table unless it is a figure printed in an IRS table. This is analysis of public documents, not investment, legal or tax advice.