Section 2801 Tax: Gifts & Bequests From Covered Expatriates

Section 2801 taxes the US person who receives a gift or bequest from a covered expatriate, not the expatriate who gives it. The recipient pays at the highest gift or estate tax rate, 40%, on the amount above the annual per-donee exclusion. Unlike the one-time exit tax, this obligation can last indefinitely.

Most people planning to renounce focus on the exit tax they might pay on the way out. Section 2801 is the part that keeps working long after, and it lands on family back home rather than on the expatriate.

How Section 2801 works

If you are or become a covered expatriate, any "covered gift or bequest" you later make to a US citizen or resident can be taxed in the recipient's hands. The US recipient adds up covered gifts and bequests received in the calendar year, subtracts the per-donee exclusion ($19,000 for 2025), and pays 40% on the rest.

Who pays, and why it surprises people

The tax falls on the recipient. This is the opposite of normal gift tax, where the giver is responsible. The logic is that a covered expatriate is outside the US tax net, so the law reaches the transfer through the US person who benefits from it. A US child receiving an inheritance from a parent who renounced can owe this tax.

Reporting on Form 708

The recipient reports and pays using Form 708. It is due by the 15th day of the 18th month after the close of the calendar year in which the covered gift or bequest was received, a deliberately long window that still catches many people off guard.

The rules are now final

Treasury finalized the Section 2801 regulations effective January 14, 2025, applying to covered gifts and bequests received on or after January 1, 2025. After years of proposed-only guidance, this is now settled law, which makes planning for it part of any serious expatriation decision.

Why it matters before you renounce

If you expect to support or leave assets to US family, Section 2801 can outweigh the one-time exit tax over time. Avoiding covered-expatriate status in the first place is the cleanest way to keep your future gifts out of its reach, which is another reason to read how to legally reduce the exit tax and to confirm your status on Form 8854.

Sources: Federal Register §2801 final regulations (2025); 26 CFR Part 28. See sources.

Frequently asked questions

What is the Section 2801 tax?

Section 2801 imposes a tax on US citizens or residents who receive a gift or bequest from a covered expatriate. The recipient, not the expatriate, pays the tax, at the highest gift or estate tax rate (40%), on the value above the annual per-donee exclusion.

Who pays tax on gifts from a covered expatriate?

The US recipient pays. This reverses the usual rule, where the donor handles gift tax. If a covered expatriate gives or leaves property to a US person, the burden falls on the person who receives it.

What is the rate for the 2801 inheritance tax?

It is the highest estate or gift tax rate in effect when the transfer is received, which is 40%. The taxable amount is the year's total covered gifts and bequests minus the per-donee exclusion ($19,000 for 2025).

What is Form 708?

Form 708 is the return a US recipient uses to report and pay the Section 2801 tax. It is due by the 15th day of the 18th month following the close of the calendar year in which the covered gift or bequest was received.

How long does Section 2801 last?

Indefinitely. The tax can apply to gifts and bequests from a covered expatriate during life and at death, with no expiration. It is the one part of expatriation that keeps reaching back to US family for years afterward.

Section 2801: Gifts and Bequests From Covered Expatriates