Co-Owning U.S. Real Estate with a Spouse or Child: Joint Tenancy vs. Tenancy in Common, Gift Tax, and What Happens at Death

Updated October 2026: We corrected how this article treats real estate held with a spouse who is not a U.S. citizen. When spouses hold real property as joint tenants with right of survivorship or as tenants by the entirety, recording the deed is not a gift to the non-citizen spouse; any gift is measured when the tenancy ends other than by death, for example on a sale. (Source: Treas. Reg. §25.2523(i)-2 (eCFR))

When you buy a home or an investment property in the United States, the way the names appear on the deed is not a formality. It determines gift tax exposure, estate tax inclusion, whether the property goes through probate, and how much of the cost basis steps up at death. Two common Japanese instincts, having one spouse pay for a property titled in both names and adding a child to the deed for convenience, can create filing obligations and real tax in the U.S. This article explains, as of 2026, the differences between joint tenancy and tenancy in common, the gift tax consequences of sharing title with a spouse or child, what happens at death, and how the Japanese rules interact.

Three Forms of Co-Ownership

Form	Shares	At death	Notes
Joint tenancy with right of survivorship (JTWROS)	Equal	Passes automatically to the survivor; no probate	Common for spouses and parent-child; in most states a sale of one share converts the property to a tenancy in common
Tenancy in common (TIC)	Can be unequal (e.g., 70/30)	Share passes under a will or intestacy; probate required	Suited to co-investors, blended families, or parents who want defined shares
Tenancy by the entirety (TBE)	Spouses as a unit	Passes to the surviving spouse	Available to married couples in New York and about half the states; strong protection against one spouse’s creditors

In addition, nine states including California and Texas follow community property rules, under which property acquired during marriage generally belongs to both spouses and the entire property receives a stepped-up basis at the first spouse’s death (the double step-up).

Sharing Title Is a Gift: The Basics

U.S. gift tax is imposed on the donor, and adding someone who did not contribute funds to the title of real estate is generally a completed gift of that share at the time of recording (unlike a joint bank account, where the gift occurs only when the co-owner withdraws). Spousal joint tenancies with a non-citizen spouse are an exception, explained next. The 2026 annual exclusion is $19,000 per recipient; gifts above that amount must be reported on Form 709. A U.S. citizen or resident donor usually owes no tax because of the lifetime exemption ($15,000,000 in 2026), but the filing requirement remains.

The trap when a spouse is not a U.S. citizen

Gifts between spouses are unlimited and tax-free only if the recipient spouse is a U.S. citizen. If the recipient is not a citizen, the marital deduction is unavailable and only a special annual exclusion of $194,000 (2026) applies. Real estate held by spouses as joint tenants with right of survivorship or as tenants by the entirety follows a special rule, however. Under Treas. Reg. §25.2523(i)-2, creating such a tenancy in real property with a non-citizen spouse is not treated as a gift when the deed is recorded, regardless of how much each spouse paid and regardless of whether the paying spouse is a citizen, a resident, or a nonresident alien. The paying spouse also 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. Suppose a husband pays the entire $1,000,000 price of a home titled as JTWROS with his non-citizen wife, and they later sell it for $1,000,000 and split the proceeds equally. At the sale, the husband is treated as making a $500,000 gift to his wife (his 100% share of the proceeds minus the $500,000 he kept). The amount above the $194,000 exclusion (2026) must be reported on Form 709. If the husband is a U.S. citizen or resident, his lifetime exemption generally absorbs it. If he is a nonresident alien, the result depends on what is transferred and where it is located, so get advice before the sale.

A parent in Japan adding a child to the deed

The same problem arises when a parent living in Japan buys U.S. property and puts a U.S.-resident child on the title. A gift of U.S. real estate (tangible U.S.-situs property) by a nonresident alien is subject to U.S. gift tax, with only the $19,000 annual exclusion and no lifetime exemption. Japan may also impose gift tax on the child (for example, when either party resides in Japan, or when a Japanese national has lived in Japan within the past ten years). Model both countries’ gift taxes before sharing title.

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At Death: Estate Tax, Probate, and Basis

• A JTWROS interest passes automatically to the survivor without probate. A TIC share passes under the will or state intestacy law and requires probate. A Japan resident who holds U.S. property as a tenant in common exposes the heirs to ancillary probate in the U.S., which is slow and costly.
• For spouses holding JTWROS, only 50% is included in the decedent’s estate if the surviving spouse is a U.S. citizen (a qualified joint interest). If the surviving spouse is not a citizen, the 50% rule does not apply; the full value is included unless the survivor can prove his or her own contributions (the contribution rule of Section 2040(a)). The same contribution rule applies to parent-child joint tenancies.
• The portion included in the estate receives a stepped-up basis to date-of-death value. If a parent paid the entire price and dies first, the child’s basis in the whole property becomes fair market value. Conversely, a non-contributing spouse’s share that is not included in the estate does not step up.
• The 2026 estate tax exemption is $15,000,000 for citizens and residents but only $60,000 in principle for nonresident aliens (the U.S.-Japan estate tax treaty may increase it). Bequests to a non-citizen spouse do not qualify for the marital deduction unless a qualified domestic trust (QDOT) is used.

How Japan Treats the Same Transactions

For Japanese tax purposes, a spouse or child who did not contribute funds is treated as having received a gift when the co-ownership interest is acquired, potentially triggering Japanese gift tax. When an interest passes at death under a right of survivorship, Japan treats the acquisition as a bequest subject to inheritance tax. U.S. gift or estate tax paid can generally be credited against the Japanese gift or inheritance tax, but valuation and timing do not always line up (for example, with a non-citizen spouse holding as a joint tenant, the U.S. measures the gift when the tenancy ends, not when the deed is recorded), so keep consistent records for both countries.

Frequently Asked Questions

My husband will pay for the house, but we want both names on the deed. What are the options?

If the wife is a U.S. citizen, the marital deduction eliminates the gift tax issue. If she is not, titling the home with her as joint tenants with right of survivorship or as tenants by the entirety is not a gift when the deed is recorded, even if the husband pays everything and even if he is a nonresident alien. The gift question comes up when the tenancy ends other than by death, such as on a sale: depending on how the proceeds are divided, the husband may then make a gift, and amounts above the $194,000 annual exclusion (2026) must be reported on Form 709. This special rule covers spousal joint tenancies and tenancies by the entirety only, not tenancy in common, so confirm the form of title with an adviser.

Is adding a child to the deed a good estate planning move?

It avoids probate, but consider the gift tax filing, exposure to the child’s creditors or divorce, the loss of control (you cannot sell or refinance without the child’s consent), and the possibility that the gifted share will not receive a stepped-up basis. Compare alternatives such as a revocable trust or holding the property through an LLC.

We bought as tenants in common. What happens when one of us dies?

The decedent’s share passes under the will or state intestacy law through probate. If a Japan-resident heir receives it, a Japanese inheritance tax filing is also required in addition to the U.S. process. Document the valuation and the stepped-up basis for both returns.

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This article is provided for general informational purposes only and does not constitute individual tax or legal advice. Please review current IRS rules, state law, and Japanese tax law, and consult qualified professionals in both countries before acting.

Summary

Joint tenancy is convenient because it avoids probate, but putting a non-contributing person on the deed is generally a completed gift. With a non-citizen spouse holding as a joint tenant or tenant by the entirety, the gift is measured when the tenancy ends rather than when the deed is recorded. When the donor is a nonresident alien, gift tax filings and payments become real. At death, the contribution rule determines how much is included in the estate and how much basis steps up, and Japan imposes its own gift and inheritance taxes on the same transfers. Decide the form of title before closing, based on who pays, who is a citizen, and where everyone lives, with advisers in both countries.

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