Technical article

Does the US Tax My Estate if I Am a Citizen Living in Another Country?

For a citizen, the gap that matters is how the estate compares with the exclusion, and how the other country taxes the same estate.

By Neil Solomon · 3 min read

Imagine a retired US citizen living in Mexico. He holds an estate of US$8 million, as an example, made up of investments, a house and a few accounts. Does he escape US estate tax because he lives abroad?

He does not. The IRS and PwC both say US citizens are taxed on their assets everywhere in the world, wherever they live. The same goes for people domiciled in the United States. Residence abroad does not move a citizen out of the net.

What the example estate owes is a different question. The 2026 exclusion is US$15 million per person, and the top rate above it is 40%. The exclusion was US$13.99 million in 2025, and the law now keeps US$15 million as the base and adjusts it for inflation. An estate of US$8 million is below the line, and no federal estate tax would be due on it. An estate of US$20 million would owe tax on the part above the line, with 40% as the top rate, which is about US$2 million on the extra US$5 million.

A non-citizen who lives abroad. The US reaches only what is in the US. Foreign bank-branch deposits and some kinds of debt are treated as not in the US. A treaty can narrow what counts as US-situs. The IRS lists estate and gift treaties with Australia, Austria, Denmark, France, Germany, Japan and the UK, and estate-only treaties with Canada, Finland, Greece, Ireland, Italy, the Netherlands, South Africa and Switzerland. None is listed for Mexico, Spain, Portugal or Belgium.

Gifts follow the same line. Gift tax uses the same exclusion and the same 40% rate. There is a yearly exclusion of US$19,000 per person who receives a gift in 2026, and gifts to schools and medical providers, paid directly, are unlimited. A gift to a trust is taxed once the donor has given up control. If the donor keeps the right to decide who enjoys the property, the trust's assets can be pulled back into the estate at death.

Grandchildren. Generation-skipping tax is 40% on transfers to people two or more generations below the giver. The same US$15 million exemption can cover it if it is allocated. Where the grandchild lives does not change the definition.

The step-up. Property in the estate gets a new tax basis equal to its market value at death. An irrevocable trust outside the estate generally does not.

You might say: "I have lived abroad for twenty years. Surely I have cut my US ties." The sources do not say that years abroad cut the tie. Citizenship holds it. A person who gave up citizenship would face other rules. For a citizen, the gap that matters is how the estate compares with the exclusion, and how the other country taxes the same estate.

That second question is the common one. Mexico has no estate tax on residents' inheritances, but its sources say gifts from outside the family above MXN 128,384 (approximately US$7,000) are income. A US citizen in Mexico can therefore have a US question and a Mexican question about the same house.

You could write down your estate figure, the country where you live, and whether a treaty exists with that country. Then you could set the number beside US$15 million.

If you are a US citizen living abroad, how did you first learn that the estate tax still followed you? Share it here, because someone in the same position may benefit from your story.

Figures are estimates for planning, based on public data. Date read: October 2026.