Who Actually Pays US Gift Tax on a Cross-Border Gift?
The giver pays US gift tax, and only if the giver is a US person1. That single fact flips most cross-border gift questions on their head. If your Israeli parents (not US persons) wire you a down payment, there is no US gift tax and no US form for them. If you, a US-citizen oleh, gift money to family, you are the one who may need to file. The receiver almost never owes US gift tax; what the receiver sometimes owes is an information report.
Not advice
Almost every new oleh is blindsided here for the opposite reason they expect. They brace for a tax on the money landing in their Israeli account, when in fact a gift received from a non-US relative is tax-free income in the US. The trap is not tax, it is a silent reporting duty: receive enough from a foreign person and you must file Form 3520, even though you owe nothing4. This article keeps the US side and the Israeli side in separate, labeled sections, because collapsing them is exactly how olim get the answer wrong.
The US Side: How Gift Tax Works for a US-Person Giver
If you are a US citizen or green-card holder making a gift, the US gives you two stacked allowances before any tax is even theoretical: an annual exclusion per recipient, and a very large lifetime exemption behind it1.
What Is the Annual Exclusion, and Does It Need a Filing?
The annual exclusion lets a US-person giver hand each recipient up to $19,000 per year (2025 and 2026) with no gift-tax filing at all1. It is per recipient and resets each calendar year, so a couple can gift one adult child up to $38,000 a year between them, exclusion-free1. Stay under the annual exclusion and there is no Form 709 and no exemption used.
What Happens Above the Annual Exclusion?
Going over the annual exclusion does not usually mean a tax bill. It means you file Form 709 and the excess draws down your lifetime exemption, which is currently $15,000,000 for 20261. Only once your cumulative lifetime gifts above the annual exclusion exceed that exemption does an actual gift-tax check come due. For the overwhelming majority of olim funding a child or being funded by a parent, Form 709 is a reporting exercise that nibbles the lifetime exemption, not a tax event.
The Non-Citizen-Spouse Trap
Gifts to a US-citizen spouse are unlimited and untaxed under the marital deduction2. But a gift to a spouse who is not a US citizen does not get that unlimited deduction. Instead it gets its own, far smaller annual exclusion of $190,000 for 20253. This bites in a very common oleh household: a US-citizen spouse and an Israeli (non-US-citizen) spouse. Moving a large sum into the Israeli spouse's sole name, or buying a home in the Israeli spouse's name with the US spouse's money, can be a reportable gift above that ceiling that draws down the US spouse's lifetime exemption.
Gift or Loan? The Distinction That Decides Everything
A genuine loanis not a gift, so it uses no annual exclusion and no lifetime exemption. But the US looks at substance, not labels. To be respected as a loan, an intra-family advance generally needs the hallmarks of a real debt: a written note, a stated interest rate, and an actual expectation of repayment. A "loan" that is never repaid and never chased can be recharacterized as a gift in the year it was made. For an oleh down payment, deciding up front whether the family money is a gift (use exclusion and exemption, possibly file Form 709) or a loan (document it properly) is the cleanest way to avoid a surprise reclassification later.
The Receiving Side: Form 3520
When a US person receives gifts or bequests from a non-US individual or a foreign estate totalling more than $100,000 in a year, the money is excluded from gross income (so no US income tax), but the receipt must be reported on Form 352045. This is the form olim most often miss precisely because no tax is due: a US-citizen oleh whose Israeli parents fund a 600,000-shekel down payment has tax-free money and a mandatory information return. Form 3520 is filed by the recipient, separately from the income-tax return, and the late-filing penalty is a percentage of the unreported amount, so the cost of forgetting is high5.
| Scenario (US-person view) | US gift tax due? | US form to file | Who files it |
|---|---|---|---|
| You gift a child $19,000 or less | No | None (within annual exclusion) | You (the giver) |
| You gift a child above the annual exclusion | No (draws down lifetime exemption) | Form 7091 | You (the giver) |
| You gift a non-US-citizen spouse above $190,000 | No (draws down lifetime exemption) | Form 7093 | You (the giver) |
| Your non-US parents gift YOU over $100,000 | No (excluded from income) | Form 35204 | You (the recipient) |
The Israeli Side: No Gift Tax, but Not Consequence-Free
Israel imposes no gift tax between most individuals, and no inheritance or estate tax either7. A relative gifting you cash, here or abroad, creates no Israeli מס הכנסה (mas hachnasa)on the gift itself. That is genuinely simpler than the US side. But "no gift tax" is not the same as "no tax," and the gap shows up the moment the gift is an asset rather than cash, especially real estate.
What Happens When the Gift Is Israeli Real Estate?
Gifting Israeli property (rather than the cash to buy it) is a transfer the Israel Tax Authority looks through, even though no money changes hands6. Two charges can surface. For the giver, transferring property can be a deemed disposition that exposes the built-up appreciation to מס שבח (mas shevach), the real-estate appreciation tax, although intra-family gifts can qualify for relief or reduced rates depending on the relationship6. For the recipient, acquiring property by gift can trigger מס רכישה (mas rechisha), purchase tax, again often at a reduced intra-family rate6. The exact relief depends on the family link and the property, so this is a case to price with an Israeli real-estate-tax adviser before transferring title.
Cash to Buy a Home Is the Cleaner Path
For most olim the down-payment question is about cash gifted from abroad, then used to buy. Cash given between individuals carries no Israeli gift tax7, and you, as buyer, pay mas rechisha on the purchase as any buyer would, with the reduced first-home rate available within the oleh window if you qualify7. The Israeli mechanics of receiving and documenting a foreign-sourced down payment, and proving its origin to your Israeli bank, are covered in depth in our gifted-down-payment guide linked below.
Worked Example: A US-Citizen Oleh Funded by Parents Abroad
Dvir made aliyah from New York and is a US citizen. In 2026 his parents in the US (also US citizens) gift him $250,000 toward a Jerusalem apartment. Two separate tax systems look at this one transfer.
US side (the givers are US persons, so the giver rules apply to the parents): Each parent can use their $19,000 annual exclusion, so $38,000 passes exclusion-free1. The remaining $212,000 is reported by the parents on Form 709 and drains that much from their lifetime exemption. With the 2026 exemption at $15,000,000 each, no gift tax is actually paid1. Because the gift came from US persons, Dvir does not file Form 3520 (that form is only for gifts from non-US persons)4.
Israel side: The $250,000 is cash between individuals, so no Israeli gift tax and no mas hachnasa on the gift7. When Dvir buys, he pays mas rechisha on the apartment as the buyer, at the reduced first-home oleh rate if he qualifies7.
Now flip one fact.Suppose the parents were Dvir's Israeli aunt and uncle (non-US persons). The US giver rules vanish: no Form 709 for them. But because Dvir is a US person receiving more than $100,000 from non-US individuals, he must file Form 3520, despite owing zero US tax4. Same money, completely different US paperwork, decided entirely by whether the giver is a US person.
Knowledge check
Your Israeli grandmother (not a US person) gifts you, a US-citizen oleh, $150,000 toward a home. What is your US obligation?
US gift tax follows the giver, not the receiver, and only applies if the giver is a US person. If your Israeli (non-US) parents fund your down payment, they owe no US gift tax and file no Form 709; the only US task is yours, reporting the receipt on Form 3520 if it exceeds $100,000 in a year (tax-free, but mandatory). If you are the US-person giver, the first $19,000 per recipient per year passes with no filing, and amounts above that go on Form 709 and merely draw down your lifetime exemption ($15,000,000 for 2026) rather than triggering an actual tax check. A gift to a non-US-citizen spouse loses the unlimited marital deduction and instead gets a $190,000 annual exclusion. On the Israeli side there is no gift tax or inheritance tax between most individuals, but gifting Israeli real estate (rather than cash) can trigger mas shevach for the giver and mas rechisha for the recipient, often at reduced intra-family rates.
No. US gift tax applies only when the giver is a US person. Israeli (non-US) parents owe no US gift tax and file no Form 709. The only US consequence is on your side: if their gift to you exceeds $100,000 in the year, you (a US person) report the receipt on Form 3520, tax-free.
Almost certainly not. The first $19,000 per recipient per year passes with no filing. Anything above that is reported on Form 709 and simply draws down your lifetime exemption of $15,000,000 for 2026; you only write a gift-tax check once cumulative taxable gifts exceed that exemption.
Not without limit. Gifts to a US-citizen spouse are unlimited under the marital deduction, but gifts to a non-US-citizen spouse only get a special annual exclusion of $190,000 for 2025. Funding the Israeli spouse's sole-name account or property above that is a reportable gift that draws down your lifetime exemption.
A real loan uses no annual exclusion and no lifetime exemption, but it must look like a real loan: a written note, a stated interest rate, and genuine repayment, or the US can recharacterize it as a gift. Decide and document up front. A casual loan that is never repaid is the kind of thing that gets reclassified to the year it was made.
Israel has no gift tax between most individuals and no inheritance tax. Gifted cash creates no Israeli charge. But a gift of Israeli real estate can trigger mas shevach for the giver and mas rechisha for the recipient, often at reduced intra-family rates, so gifting property is not the same as gifting the cash to buy it.
Because no tax is owed on the gift itself, olim assume nothing is required, and that is the expensive mistake. The late-filing penalty on a missed foreign-gift report is calculated as a percentage of the unreported gift. The form is purely informational, but skipping it is what turns a tax-free gift into a real cost.
