Here’s the good news: No, you will generally NOT be taxed on the $10,000 gift money you received from your mother in South Korea as the recipient.
Here’s why and what you need to know:
- U.S. Gift Tax is on the Giver: In the U.S., the gift tax is generally imposed on the giver of the gift, not the recipient.
- No U.S. Jurisdiction for Foreign Givers: When the gift giver is a foreign person who is not a U.S. citizen or resident, the U.S. generally does not have jurisdiction to impose a gift tax on them, especially if the gifted property (money in this case) is not “situated” in the U.S. at the time of the gift.
- Recipient Taxability: Gifts received are generally excluded from the recipient’s gross income, meaning you don’t pay income tax on them.
However, there’s a very important reporting requirement you might have:
Even though you don’t pay tax on the gift, the IRS requires U.S. persons to report the receipt of large gifts from foreign sources to prevent money laundering and other illicit activities.
- IRS Form 3520: You are required to file Form 3520, “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts,” if you receive gifts from a foreign individual or foreign estate that aggregate to more than $100,000 in a calendar year.
Since you received $10,000, which is below the $100,000 threshold for gifts from a foreign individual, you do not need to file Form 3520 for this specific gift.
Key Takeaways for your situation:
- No tax on the $10,000 gift.
- No IRS Form 3520 filing requirement for $10,000 from a foreign individual.
Important Considerations for the Future:
- Aggregated Gifts: If your mother (or other related foreign individuals) sends you more money in the same calendar year, and the total from them exceeds $100,000, then you would need to file Form 3520. The $100,000 threshold applies to the aggregate amount received from the same foreign individual (or related foreign individuals) in a tax year.
- Gifts from Foreign Corporations/Partnerships: If a gift comes from a foreign corporation or partnership, the reporting threshold is much lower (e.g., around $19,570 for 2024, adjusted annually for inflation). This is unlikely for a gift from your mother, but good to know.
- Penalties for Not Reporting: If you were to receive a large gift over the threshold and fail to file Form 3520, the penalties can be substantial (5% of the gift’s value per month, up to 25% of the gift, unless there’s reasonable cause).
- Income from Gifted Assets: If you invest this $10,000 and it earns interest or capital gains, that income would be taxable in the U.S.
For your specific situation of $10,000 from your mother, you’re in the clear on both tax and reporting.