Specialized Returns & Estate

$130,000

30% on gross FDAP income unless a tax treaty provides a lower rate Effectively connected income is generally taxed at graduated rates after allowable deductions

$40,000 ($20,000 MFS) combined for state/local income/sales tax, real estate tax, and personal property tax. 30% phaseout above MAGI $500K ($250K MFS), floor at $10K ($5K MFS). 2026: $40,400.

Taxpayer age 70.5+ may direct up to $108,000 from IRA directly to qualified charity. Counts toward RMD, excluded from income, NOT deductible (no double benefit). Must be trustee-to-trustee transfer.

$13,990,000 per decedent ($27,980,000 for married couple with portability). Top rate: 40%.

$19,000 per recipient per year. Gifts above this count against the lifetime exemption or pay gift tax. Married couples gift-splitting: $38,000 per recipient.

$190,000 (2025) — NOT unlimited like the marital deduction for US-citizen spouses. Excess counts against lifetime exemption or pays gift tax.

A surviving spouse can use the deceased spouse's unused exclusion after a timely Form 706 portability election, even if no estate tax return was otherwise required. A surviving spouse who is both a nonresident and noncitizen generally cannot use DSUE except as permitted by treaty; citizenship alone is not the test.

A Qualified Domestic Trust is generally needed to obtain the estate-tax marital deduction for property passing to a noncitizen surviving spouse, subject to treaty and citizenship-before-filing exceptions.

If gifts to any individual exceed $19,000 (except excluded gifts), OR if splitting gifts with spouse, OR if giving a future interest to anyone. Due April 15 with Form 1040. Form 4868 extends both.

If gross estate + adjusted taxable gifts > $13,990,000 (2025). Due 9 months from date of death (6-month extension available). Must file even below threshold to elect portability (DSUE).

Only real property held for business or investment. No more like-kind exchanges for personal property (equipment, vehicles, art). Personal-use real estate does NOT qualify.

2 years for most property (from end of first tax year gain realized) 3 years for condemned business/investment real estate (eminent domain) 4 years for livestock (weather-related) 4 years after the close of the first tax year gain is realized for a principal residence or contents damaged in a federally declared disaster; IRS may grant a reasonable-cause extension

Active participants who own ≥10% may deduct up to $25,000 of rental losses against non-passive income. Phaseout: MAGI $100K–$150K (reduced $1 per $2 over $100K). Eliminated at $150K. MFS lived apart: $12,500 cap.

1. NOLs (current year + carryovers) 2. General business credits 3. Minimum tax credit 4. Capital loss carryovers 5. Basis of depreciable assets 6. Passive activity loss/credit carryovers 7. Foreign tax credit carryovers (Taxpayer may elect §108(b)(5) to reduce depreciable property basis first)

Available for (1) US citizens/residents living and working abroad with tax home outside US, (2) NRAs with no US wage withholding, (3) military serving outside US. Must attach statement. Interest still accrues from April 15.

Must file FinCEN Form 114 if US person has aggregate value >$10,000 in foreign financial accounts at any time during the year. Due April 15 (auto extension to October 15). Filed electronically with FinCEN, NOT with tax return.

Living in US: Single/HoH $50K year-end / $75K anytime; MFJ $100K / $150K. Living abroad: Single/HoH $200K / $300K; MFJ $400K / $600K. Penalty: $10,000 for non-filing, up to $60,000 total.

Bona fide residence test — resident of foreign country for uninterrupted period including full tax year. Physical presence test — 330+ full days in foreign country in any consecutive 12-month period. Must file Form 2555. FEIE is an election (revocable only with IRS consent).

Must be present in US ≥31 days in current year AND 183+ days using formula: current year days + 1/3 × prior year days + 1/6 × 2 years prior. Exceptions: foreign government officials, teachers, students, commuters.

Must file Form 3520 if receiving gifts/inheritances from nonresident aliens or foreign estates exceeding $100,000 per year. Penalty: 5% of gift per month (max 25%). Reasonable cause exception available.

May skip Form 1116 if all foreign income is passive (reported on 1099-DIV/1099-INT) and total foreign tax ≤$300 ($600 MFJ). Excess credit: carry back 1 year, carry forward 10 years.

IRD is income the decedent earned before death but received after death. It does NOT get a step-up in basis. Reported by either the estate (Form 1041) or the beneficiary who receives it (Form 1040).

IRD examples: unpaid wages/bonuses, retirement plan distributions (401k, IRA), and accrued but unpaid interest/dividends. Post-death wages are reported on Form 1099-MISC (NOT W-2) to the estate or beneficiary.

When an IRD item is also included in the decedent's gross estate, the beneficiary may deduct the federal estate tax attributable to that IRD on Schedule A as an other itemized deduction. Not subject to the 2% floor. No deduction if the estate owed no estate tax.

Services are US-source if physically performed in the US, foreign-source if performed outside the US — the payor's location does NOT determine source. FEIE (§911) allows exclusion of up to $130,000 (2025) of foreign-source wages.

De minimis: skip Form 1116 if ALL foreign income is passive AND total foreign tax paid is ≤ $300 ($600 MFJ). NO FTC allowed for: Iran, North Korea, Sudan, Syria.

Estate: $600; Simple trust: $300; Complex trust: $100; Qualified disability trust: $5,100.

Annual exclusion: $19,000 per recipient per year. Gifts to a non-citizen spouse: $190,000 annual exclusion (not unlimited like for US-citizen spouse).

$13,990,000 per decedent ($27,980,000 married couple). Top estate/gift tax rate: 40%.

Mandatory order: (1) NOLs (current year, then carryforwards), (2) General business credit carryovers, (3) Minimum tax credit carryovers, (4) Capital losses (current year, then carryforwards), (5) Basis reduction (depreciable and non-depreciable pro rata), (6) Passive activity loss/credit carryovers, (7) Foreign tax credit carryovers. NOLs are burned FIRST.

Estate: $600. Simple trust: $300. Complex trust: $100. Qualified disability trust: $5,100.

$108,000 from a traditional or Roth IRA directly to a qualified charity, for taxpayers age 70.5 or older. QCD is excluded from income, counts toward RMD, and is NOT also deductible as a charitable contribution. Must be trustee-to-trustee transfer.

$19,000 per recipient per year (present-interest gifts only). Gifts to a non-citizen spouse: $190,000 annual exclusion — NOT the unlimited marital deduction available for US-citizen spouses. Married couples splitting gifts: $38,000 per recipient.

$13,990,000 per decedent ($27,980,000 for a married couple with portability). Top estate/gift tax rate: 40% (progressive from 18%, hits 40% once taxable estate exceeds exemption by $1,000,000).

(1) NOLs (current year then carryforwards), (2) General business credit carryovers, (3) Minimum tax credit carryovers, (4) Capital losses (current year then carryforwards), (5) Basis reduction (depreciable and non-depreciable pro rata), (6) Passive activity loss/credit carryovers, (7) Foreign tax credit carryovers. NOLs are burned FIRST.

trade or business rental → Schedule C profit-motivated but not a business → income on Schedule 1 line 8l profit-motivated but not a business → expenses on Schedule 1 line 24b not reported as a Schedule E real-estate rental

aggregate foreign financial accounts exceed $10,000 at any time during the calendar year file FinCEN Form 114 electronically with FinCEN FBAR is not filed with the federal income tax return due April 15 automatic extension to October 15

unmarried or MFS → more than $50,000 at year-end or $75,000 at any time MFJ → more than $100,000 at year-end or $150,000 at any time Form 8938 is attached to the income tax return

unmarried or MFS → more than $200,000 at year-end or $300,000 at any time MFJ → more than $400,000 at year-end or $600,000 at any time Form 8938 is attached to the income tax return

no Form 8938 and FBAR are separate reporting requirements a taxpayer may need to file both Form 8938 is filed with the tax return FBAR is filed electronically with FinCEN