Many people have heard that gifts between spouses are tax-free in the United States no matter how large. That is true only when the spouse receiving the gift is a U.S. citizen. If one spouse has naturalized and the other is still a Japanese citizen, if your wife or husband holds a green card, or if a U.S.-citizen spouse is married to someone living in Japan, gifts to the non-citizen spouse follow a different set of rules.
When your spouse is not a U.S. citizen, the unlimited marital deduction is not available. Instead there is a special annual exclusion, $194,000 for 2026. Helping with a home purchase, moving a brokerage account into your spouse’s name, or depositing a large sum in your spouse’s account can quietly create a Form 709 filing requirement.
This article covers the rules for gifts to a spouse who is not a U.S. citizen, when Form 709 is required, how joint accounts and jointly owned real estate are treated, the qualified domestic trust (QDOT) at death, and the Japanese gift tax angle. If you are planning year-end transfers, review this first.
Key points
- If the spouse receiving a gift is not a U.S. citizen, the unlimited gift tax marital deduction does not apply. A spouse with a green card is still a non-citizen spouse.
- Instead, for 2026 the first $194,000 of gifts to a non-citizen spouse (other than gifts of future interests) is excluded. That figure includes the regular $19,000 annual exclusion.
- If you exceed that amount, or give your spouse any future interest, file Form 709 by April 15 of the following year. With a $15,000,000 lifetime basic exclusion in 2026, actual gift tax is rare.
- When the spouse is not a citizen, putting real estate in joint tenancy is not treated as a gift when the property is acquired; the gift is measured when the joint ownership ends, such as on a sale. With a joint bank account, the gift occurs when the non-contributing spouse withdraws funds for his or her own benefit.
- At death, property left to a non-citizen spouse generally does not qualify for the estate tax marital deduction unless it passes to a QDOT or another exception applies.
Why the spouse’s citizenship matters
The U.S. gift tax is imposed on the person making the gift, and U.S. citizens and residents are subject to it on gifts of property located anywhere. When the receiving spouse is a U.S. citizen, the marital deduction makes the gift fully tax-free, and the IRS generally does not require a Form 709 to report it.
Internal Revenue Code section 2523(i), however, disallows the marital deduction when the donor’s spouse is not a U.S. citizen. The test is the recipient’s citizenship, not where the spouse lives or which visa the spouse holds. A Japanese-citizen spouse with a green card living in the U.S. and a spouse living in Japan are treated the same way.
| Spouse receiving the gift | Marital deduction | 2026 treatment | Form 709 |
|---|---|---|---|
| U.S. citizen | Yes, unlimited | Tax-free regardless of amount | Generally not required |
| Not a U.S. citizen (green card holder, work visa, living in Japan, etc.) | No | Up to $194,000 a year excluded (special annual exclusion) | Required in a year gifts exceed $194,000 or include a future interest |
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How the $194,000 special annual exclusion works
Under IRS Rev. Proc. 2025-32, the first $194,000 of gifts made in 2026 to a spouse who is not a U.S. citizen (other than gifts of future interests) is not included in taxable gifts. The 2025 Form 709 instructions describe the 2025 amount of $190,000 as available provided the amount above the regular $19,000 exclusion would otherwise qualify for the marital deduction if the spouse were a citizen. For 2026, think of it as the regular $19,000 plus an additional $175,000, for $194,000 in total.
Three points to keep in mind:
- It is a calendar-year limit. All gifts to your spouse from January 1 through December 31 are added together.
- The gift must be a present interest. Transfers your spouse can use right away, such as cash or securities moved into your spouse’s name, qualify. A gift of a future interest does not qualify for the exclusion and requires Form 709 regardless of amount.
- Exceeding the limit does not usually mean tax. The excess reduces your lifetime basic exclusion ($15,000,000 in 2026), and no tax is due until your cumulative taxable gifts exceed it.
When Form 709 is required
If gifts like the following to a non-citizen spouse add up to more than $194,000 in 2026, file Form 709 by April 15, 2027. An extension of your income tax return on Form 4868 also extends Form 709; to extend only the gift tax return, use Form 8892.
- Moving your own funds into a bank or brokerage account in your spouse’s sole name
- Paying for real estate titled in your spouse’s sole name
- Paying off a loan in your spouse’s name with your own money
Separately, a couple can elect gift splitting for gifts to third parties, such as children, as long as neither spouse was a nonresident who is not a U.S. citizen at the time of the gift. A spouse with a green card meets that condition.
Joint accounts and jointly owned real estate
Joint bank accounts
The Form 709 instructions explain that if you create a joint bank account for yourself and another person and you can withdraw the entire fund without the other person’s consent, you make a gift when the other person draws on the account for his or her own benefit. The gift is measured when the non-contributing spouse withdraws and uses the money, not when you make the deposit. For how the U.S. and Japan differ on joint accounts, see our article on JTWROS accounts.
Jointly owned real estate
Real estate held with a non-citizen spouse has its own rule. Under Treasury Regulation 25.2523(i)-2, when spouses take title to real property as joint tenants with right of survivorship or as tenants by the entirety on or after July 14, 1988, and the donee spouse is not a U.S. citizen, creating the tenancy is not treated as a gift, regardless of who paid. The donor spouse cannot elect to treat the creation as a gift.
Instead, the gift is measured when the tenancy ends other than by death, for example on a sale. For each spouse, multiply that spouse’s share of the original consideration by the proceeds; if the spouse receives less than that amount, the difference is a gift to the other spouse. For co-ownership more generally, see our article on co-owning U.S. real estate.
For personal property such as securities held jointly with survivorship rights, the regulation treats each spouse’s retained interest as one-half of the value when determining whether there is a gift to the non-citizen spouse. Treatment can differ by type of account or asset, so check before you retitle anything.
At death: the qualified domestic trust (QDOT)
The estate tax raises the same issue. According to the Form 706 instructions, property passing to a surviving spouse who is not a U.S. citizen generally does not qualify for the estate tax marital deduction. The exceptions are property that passes to a qualified domestic trust (QDOT), and a surviving spouse who becomes a U.S. citizen before the estate tax return is filed and was a U.S. resident at all times after the death.
- Key QDOT requirements: at least one trustee must be a U.S. citizen or a domestic corporation, and no principal can be distributed unless that trustee has the right to withhold the tax.
- Distributions from a QDOT: other than income distributions and hardship distributions, principal distributions and the property left at the surviving spouse’s death are subject to estate tax reported on Form 706-QDT.
- Jointly owned property: including only one-half of a spouse’s joint interest in the estate applies when the surviving spouse is a U.S. citizen. Otherwise the full value is included, minus the portion attributable to the survivor’s contribution.
With a 2026 basic exclusion amount of $15,000,000, many families will owe no estate tax at all. If your assets are substantial or you are concerned about Japan’s inheritance tax, plan ahead.
Do not forget Japan’s gift tax
Japan’s gift tax is paid by the recipient. Japan’s National Tax Agency explains that even a recipient living abroad can be subject to Japanese gift tax depending on factors such as Japanese nationality and whether the person had an address in Japan within the 10 years before the gift. A transfer that is within the U.S. exclusion can still be subject to Japanese gift tax (under the calendar-year system, on amounts above the 1.1 million yen basic deduction), so couples with strong ties to Japan should check that side as well.
Examples
Example 1: Moving $300,000 into a spouse’s brokerage account
Example: In 2026, a U.S.-citizen husband moves $300,000 of his own funds into a brokerage account in the sole name of his wife, a Japanese citizen with a green card. He makes no other gifts to her that year.
| Item | Wife is not a U.S. citizen | (For comparison) Wife is a U.S. citizen |
|---|---|---|
| Gift | $300,000 | $300,000 |
| Excluded | $194,000 (special annual exclusion) | $300,000 (marital deduction) |
| Taxable gift | $106,000 | $0 |
| Form 709 | Required, due April 15, 2027 | Generally not required |
| 2026 gift tax payable | $0 ($106,000 of lifetime exclusion used) | $0 |
If he instead moves $194,000 in 2026 and $106,000 in 2027, neither year requires Form 709, as long as the 2027 transfer stays within the 2027 special exclusion, which the IRS will announce later.
Example 2: A husband pays for a jointly titled home that is later sold
Example: A U.S.-citizen husband pays the entire $800,000 price of a home titled with his non-citizen wife as joint tenants with right of survivorship. No gift is treated as made at purchase, so no Form 709 is needed then. Years later they sell for $1,000,000 and split the proceeds equally (ignoring selling costs and any mortgage).
| Calculation | Amount |
|---|---|
| Husband’s share of consideration × proceeds (100% × $1,000,000) | $1,000,000 |
| Proceeds husband actually receives | $500,000 |
| Gift from husband to wife | $500,000 |
| Excess over the special exclusion, assuming the 2026 amount of $194,000 applies in the year of sale | $306,000 (reported on Form 709) |
If the husband received all of the proceeds, this calculation would produce no gift. The key difference from a citizen spouse is that the gift is determined when the joint ownership ends and the proceeds are divided, not when the title is created.
FAQ
My wife has a green card. Is she treated like a U.S. citizen?
No. The test is citizenship, so a green card holder living in the U.S. is still a non-citizen spouse and the marital deduction does not apply. For 2026, plan gifts around the $194,000 special exclusion.
What happens after my spouse becomes a U.S. citizen?
If your spouse is a U.S. citizen at the time of the gift, the regular marital deduction applies. For the estate tax, there is also an exception allowing the marital deduction without a QDOT if the surviving spouse becomes a citizen before the estate tax return is filed and was a U.S. resident at all times after the death.
What about gifts from a non-citizen wife to a U.S.-citizen husband?
Because the recipient is a U.S. citizen, the marital deduction is available if the wife is subject to U.S. gift tax. If the person making the gift is a nonresident who is not a U.S. citizen, U.S. gift tax applies only to gifts of real estate and tangible property located in the United States.
Does the $194,000 exclusion apply to a spouse who lives in Japan?
Yes. If you are a U.S. citizen or resident and your spouse is not a U.S. citizen, the same special exclusion applies wherever your spouse lives. Whether Japanese gift tax applies is a separate question.
At CLT NY INC., an IRS Enrolled Agent can review gifts to a spouse who is not a U.S. citizen and prepare Form 709 when it is required, in Japanese or English. Contact us.
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Related articles
- Co-Owning U.S. Real Estate with a Spouse or Child: Joint Tenancy vs. Tenancy in Common, Gift Tax, and What Happens at Death
- Joint Account Traps: The Hidden Gift Tax Risks for Japanese Nationals in JTWROS Accounts – Bridging the US-Japan Legal Interpretation Gap
- Understanding the US Gift Tax Annual Exclusion and Form 709: The Giver’s Responsibility, Reporting Requirements Beyond the Annual Exclusion, and the Consumption of the Lifetime Exemption.
- Understanding US Gift Tax Liability: A Comprehensive Guide to Donor Responsibility and the Lifetime Exemption
- US Estate Tax vs. Japan Inheritance Tax: Understanding the Vast Exemption Disparity and Worldwide Taxation Risks
- US Tax Filing for International Married Couples: Optimizing Your Choice Between Joint and Separate Filing
- Supporting Parents in Japan: Can You Claim Them as Dependents on Your U.S. Return? Dependency Rules and Gift Tax (2026)
Sources: IRS Rev. Proc. 2025-32 (2026 inflation adjustments); IRS Instructions for Form 709 (2025); IRS: What’s new — Estate and gift tax; IRS: Frequently asked questions on gift taxes; 26 U.S.C. 2523 (govinfo.gov); 26 CFR 25.2523(i)-2 (eCFR); IRS Instructions for Form 706 (07/2026); IRS Instructions for Form 706-QDT; National Tax Agency (Japan), No.4432; National Tax Agency (Japan), No.4402. Information as of October 2026. This article provides general information and is not individual tax advice.
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