Supporting Family Overseas: Gift Rules, Reporting, and Practical Considerations

Many Silicon Valley households send money to parents, siblings, or extended family in another country. The transfers are usually simple; the reporting rules around them are not.

A large share of the Bay Area's technology workforce was born abroad, and supporting family in another country is a routine part of many households' budgets. U.S. tax law has something to say about money flowing in each direction. Most of these rules concern reporting rather than tax owed, but the penalties for missing a form can be severe.

Gifts you send: the annual exclusion applies worldwide

A U.S. citizen or resident who gives money to anyone, in the United States or abroad, is subject to the same federal gift tax framework. For 2026, the annual exclusion is $19,000 per recipient, and any amount above that uses part of the lifetime exemption, which is $15 million per person and now permanent, as Morgan Lewis summarizes. Sending $30,000 to a parent does not create tax for most people, but it does require filing a gift tax return, Form 709, to report the $11,000 above the exclusion. A married couple can each give $19,000 to the same person, so $38,000 per parent fits within the exclusion.

Gifts to a spouse who is not a U.S. citizen follow a special rule. The unlimited marital deduction does not apply; instead, the IRS 2026 inflation adjustments allow $194,000 per year to a non-citizen spouse. This matters when retitling a home or moving a large brokerage account into joint names.

Tuition or medical expenses paid directly to an institution on someone's behalf are excluded from gift tax entirely, according to the IRS gift tax FAQ. Paying a niece's university fees directly to the school, rather than sending her cash, avoids using the exclusion at all.

A new cost on some transfers

Beginning January 1, 2026, a 1% federal excise tax applies to certain international remittance transfers. The tax reaches transfers funded with cash, money orders, cashier's checks, and similar instruments, while transfers funded from a U.S. bank account or a U.S.-issued debit or credit card are exempt, as the accounting firm KLR explains. For households sending money by bank wire or an app linked to a checking account, the tax will not apply.

Gifts you receive: Form 3520

Money flowing the other way is where surprises happen. A gift or inheritance from a foreign person is generally not taxable income to the U.S. recipient, but it may need to be reported. The IRS requires a U.S. person who receives more than $100,000 in a year from a nonresident alien individual or foreign estate to report it on Form 3520, with a much lower threshold, $20,573 for 2026, for gifts from foreign corporations or partnerships. The penalty for not filing is 5% of the gift for each month the report is late, up to 25%, unless reasonable cause is shown.

Consider a hypothetical: parents in Bangalore send their daughter in Sunnyvale $150,000 toward a down payment. She owes no income tax on the gift, but she must file Form 3520 for that year. Had she received $75,000 from each parent, the filing requirement would still apply, because the same IRS guidance requires gifts from related parties to be aggregated.

Foreign accounts and FBAR

Maintaining a bank account in a home country, whether to receive rental income, hold savings, or fund family support locally, creates its own reporting duty. A U.S. person whose foreign financial accounts exceed $10,000 in aggregate at any point during the year must file an FBAR, due April 15 with an automatic extension to October 15, according to the IRS. Accounts held jointly with a parent, or accounts over which you have signature authority, can count. A separate form, Form 8938, is also required with the return when specified foreign assets exceed $100,000 at year-end or $150,000 at any time for joint filers living in the U.S., per the IRS FATCA summary.

Practical considerations

Beyond compliance, support for family overseas is usually a long-term commitment that belongs in the household budget and the retirement plan rather than being treated as occasional. Exchange rate movements change the real cost over time. Some countries tax gifts in the recipient's hands or restrict what residents can receive, so the family member abroad may have obligations of their own. Documenting transfers helps if either country's tax authority ever asks.

Cross-border families benefit from a tax professional who works regularly with both jurisdictions. This article is educational only and does not constitute tax, legal, or investment advice; consult a qualified professional regarding your own situation.

Important Disclosures

Important Disclosures: Propulsion Capital Management is an investment adviser registered with the State of California Department of Financial Protection and Innovation. Registration does not imply a certain level of skill or training. This article is provided for general informational and educational purposes only and does not constitute investment, tax, legal, or accounting advice, nor an offer or solicitation to buy or sell any security or to adopt any particular investment strategy. The information is believed to be accurate as of the date of publication but is subject to change without notice; tax laws and regulations change frequently and their application depends on individual facts and circumstances. Nothing herein should be relied upon as a substitute for personalized advice from a qualified professional. Investing involves risk, including the possible loss of principal, and past performance is no guarantee of future results. Diversification does not ensure a profit or protect against loss. Any examples are hypothetical, are for illustrative purposes only, and do not reflect the experience of any client. Links to third-party websites are provided for convenience; Propulsion Capital Management does not endorse, and is not responsible for, the content of third-party sites. Propulsion Capital Management does not provide tax or legal advice; please consult your tax adviser or attorney regarding your specific situation.