The short answer
If your parents (or other relatives) living outside the U.S. send you money as a gift, it is generally not taxable income to you. The IRS treats gifts and inheritances you receive as excluded from your income.
But "not taxable" is not the same as "nothing to report." Large gifts from foreign persons come with a separate reporting requirement — and missing it can be expensive.
| Question | Answer for a true gift from nonresident parents |
|---|---|
| Is the gift taxable income to me? | Generally no |
| Is income the gift money earns later taxable? | Yes — interest, dividends, rent, and gains are taxable |
| Do I report it on Form 3520? | Only if gifts from related nonresident aliens total more than $100,000 in the year |
| Is Form 3520 part of my tax return? | No — it is filed separately with the IRS |
What counts as a "foreign gift"?
For IRS purposes, a foreign gift is money or property you receive from a foreign person that you treat as a gift (or inheritance) and exclude from your income. A foreign person includes:
- A nonresident alien individual — for example, parents who live in Taiwan and are not U.S. citizens or U.S. tax residents
- A foreign estate (for example, an inheritance from a parent who lived abroad)
- A foreign corporation or foreign partnership
A gift from someone who is a U.S. citizen or U.S. tax resident — even if they live abroad — is not a foreign gift for these rules.
These rules apply to amounts that are truly gifts. Money that is actually a loan you must repay, payment for work you did, or a business distribution is not a gift, and different tax rules apply. If the money is not clearly a gift, talk to a tax professional before deciding how to treat it.
The reporting rule: Form 3520 and the $100,000 threshold
You must report foreign gifts on Form 3520, Part IV when they exceed these thresholds during the tax year:
| Gift from | Report on Form 3520 if the year's total is… | What to list |
|---|---|---|
| Nonresident alien individuals or foreign estates | More than $100,000 (adding together gifts from related persons) | Each gift over $5,000 |
| Foreign corporations or foreign partnerships | More than $20,116 for 2025 ($20,573 for 2026) — adjusted for inflation each year | Each gift and the donor's identity |
The most important detail for families: you must add together gifts from people you know (or have reason to know) are related to each other. Gifts from your mother and father count as one total, not two. For several transfers, grandparents, or money routed through a relative, see Multiple foreign gifts: how does the $100,000 Form 3520 threshold work?
A worked example
During 2025, Wen, a U.S. resident, receives these transfers from her parents in Taiwan:
| Date | From | Amount (USD) |
|---|---|---|
| February 2025 | Mother | $40,000 |
| June 2025 | Father | $35,000 |
| November 2025 | Mother | $30,000 |
| Total from related nonresident aliens | $105,000 |
Result: the gifts are generally not taxable income to Wen, but the related total is more than $100,000, so she must file Form 3520 Part IV for 2025 and list each gift over $5,000. If her parents had sent $95,000 in total, no Form 3520 would be required.
Amounts a foreign person pays on your behalf for qualified tuition or medical payments are not treated as foreign gifts for Form 3520. This applies to payments made for you — money sent to you that you later spend on tuition is a gift to you. See My parents paid my tuition directly — do I report a foreign gift?
When the gift money starts earning income
The gift itself is not income, but anything it earns after you receive it is. If you deposit the money in a savings account, buy stocks, or buy a rental property, the interest, dividends, rent, and gains are taxable to you as a U.S. tax resident — whether the account or property is in the U.S. or abroad.
What happens if you don't report?
If you fail to file Form 3520 on time for a reportable foreign gift — or file it with incomplete or incorrect information — two things can happen:
- A penalty of 5% of the value of the gift for each month it is not reported, up to a maximum of 25% of the gift, unless the failure was due to reasonable cause.
- The IRS may determine the income tax consequences of the money itself — in other words, it may not accept that the money was a gift.
Because the penalty is based on the size of the gift, a missed Form 3520 on a large transfer can be very costly even though no income tax was owed on the gift. If a deadline has already passed, see I filed Form 3520 late — what should I do now?
Special situations
Gifts from covered expatriates
If the giver is a former U.S. citizen or former long-term green card holder who is treated as a "covered expatriate," a different rule applies: the U.S. recipient may owe a special transfer tax on the gift. This is rare, but if your relative gave up U.S. citizenship or a green card, ask a tax professional before assuming the gift is tax-free.
Distributions from a foreign trust
Money you receive from a foreign trust is not reported as a gift in Part IV. It is reported as a trust distribution in a different part of Form 3520, and it may be taxable. Trust situations need professional help. See Foreign gift from your parents vs. foreign trust distribution.
For every transfer from family abroad, keep the date, the amount in U.S. dollars, who sent it, and a short note that it was a gift (for example, a message or letter from your parents). These records make Form 3520 straightforward and help show the money was a gift if the IRS ever asks.