What's the max amount of money I can send to my wife overseas, without being taxed? Also what's the max amount of money I can currency exchange without being flagged?

[v4r3l4]

I send money to my wife in japan to support her and my kids. Sometimes I also exchange currency when I'm in japan

[Anonymous_]

@pk

[pk · Accepted solution]

@v4r3l4 , assuming that you are a US person  ( i.e. a Resident for Tax purposes ), there is absolutely  no limitation on monies that you can send abroad or that you can exchange  ( US$ to Yen or what ever).  And no taxation  on monies that have already been taxed by the US.  However, any monies wired  and more than US$10,000, would automatically be internally flagged  by the bank and a SAR raised.  But nothing happens  to these.  If I remember right , if you send   a US$ 1 Million or more you need treasury approval.  For us normal folks , there is no issue anywhere with transferring and/or exchanging currency  ( unless you are currency trading, then you have to recognize the gains/losses).

Is there more I can do for you ?

k

[v4r3l4]

Hi @pk 

Okay, so as long as i send my US earned income or even if its a personal loan by a US institution. I wouldn't need to pay taxes on the money im wire transferring to my wife overseas? 

Also could you be kind enough to provide me with a reference where you are getting your information from?

Thank you,

[Opus 17]

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@v4r3l4 wrote:

Hi @pk 

Okay, so as long as i send my US earned income or even if its a personal loan by a US institution. I wouldn't need to pay taxes on the money im wire transferring to my wife overseas? 

Also could you be kind enough to provide me with a reference where you are getting your information from?

Thank you,

---

US taxpayers only pay tax on personal gifts if their lifetime total gifts is more than $11,700,000, and even then, gifts to spouses are exempt.  

However, gifts to spouses are not exempt if your spouse is not a US citizen.   In that case, you must file a gift tax return form 709 if you give more than US $159,000 in any year.  You won't owe tax unless your lifetime total of gifts is more than $11,700,000, but the return must be filed so the IRS can keep track of your large gifts against your lifetime limit.  Form 709 is not included in Turbotax, you must prepare it yourself or have an accountant help you.  The filing deadline is the same as the income tax deadline of April 15. 

See the form and instructions here.

https://www.irs.gov/forms-pubs/about-form-709

For purposes of the gift tax, it doesn't matter how you acquired the money.   If you borrowed the money, and then gifted it to someone, then you still owe the bank, it's not from the bank to your spouse, it's a loan from the bank to you and still a gift from you to your spouse.

Generally, if you take more than $10,000 cash overseas, you must declare it at the border and they will give you a form to fill out at customs.  There's no limit on how much money you can carry, but it is illegal to fail to declare if you are carrying more than $10,000.   Just declare it and fill out the form.

Likewise, if you transfer more than $10,000 via banking services (wire transfer, cash app, etc.) the bank must make a report.  There's no limit and no tax involved, but the report must be made.  Be careful, that making several small transfers to avoid the reporting requirement can constitute a separate crime call structuring even if the transactions would be illegal otherwise.  In other words, if you transfer $25,000 in one transaction, that's perfectly fine, but if you transfer $5,000 on 5 different days, that could be considered structuring to avoid the automatic reports.  

As a practical matter, you will be better off making bank transfers than carrying large amounts of cash, if at all possible. 

[v4r3l4]

Hi @Opus 17 ,

So my spouse has to be a US citizen, not a US permanent resident. In order for us to be exempt from paying gift tax and or there being no limit to the amount I can gift my spouse?
And if shes not a US citizen, I'm only allowed to give her a total amount of USD $159,000 or less per year in order not to file form 709 and proceed without reporting anything to the IRS?

I'm just trying to make sure I'm understanding it correctly.

Thank you,

[Opus 17]

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@v4r3l4 wrote:

Hi @Opus 17 ,

So my spouse has to be a US citizen, not a US permanent resident. In order for us to be exempt from paying gift tax and or there being no limit to the amount I can gift my spouse?
And if shes not a US citizen, I'm only allowed to give her a total amount of USD $159,000 or less per year in order not to file form 709 and proceed without reporting anything to the IRS?

I'm just trying to make sure I'm understanding it correctly.

Thank you,

---

That appears to be the case based on the instructions to form 709, as well as IRC 2523

https://www.law.cornell.edu/uscode/text/26/2523

Note the numbers I gave before are for 2021.  There has been an inflation adjustment for 2022.

https://www.irs.gov/pub/irs-drop/rp-21-45.pdf

While gifts to spouses are usually tax exempt, gifts to spouses who are not US citizens are not tax-exempt, but they receive an annual exclusion of $164,000.  (If you read the code you will see the exclusion is shown as $100,000, that's the original law but there is an inflation adjustment and the current amount is $164,000.)

The code does not include green card holders under the category of citizen, even though green card holders (permanent residents) are almost always treated like citizens in other tax purposes.  I can't tell when this particular section of the law was last revised, possibly 1981 or earlier.

Therefore,

You can give your spouse up to $164,000 this year and a form 709 is not required.  If the gift is more than that, it must be reported, but no tax will actually be required unless your lifetime total of gifts is more than $12,060,000.  Note that all these limits are revised every year for inflation and may change. 

Also note, as you said "kids", you can give each child up to $16,000, in addition to the spousal exclusion of $164,000, without filing a gift tax return.

[pk]

@v4r3l4 , 

1. I have found no articulations  either by the US treasury or the IRS regarding non-taxability of already taxed monies  being transferred abroad, except for interactions with directly or indirectly banned / notified  entities/ persons. Thus my position that transfers to your spouse  or to a joint bank account in Japan is valid.  Your bank is the best source because  for international transfers  they often deal with corresponding banks in that country and their rules vary because of that arrangement. Also the receiving country may have limitations  on incoming amounts ( depends on the currencies involved).

2. I had assumed  ( may be in error ) that you are  as US person ( probably H-1B or similar work visa  or a Green Card  whom plans to go back to your home country) and that your spouse  is there in preparation for return to the home country.  Thus I did not address the Estate Tax issue which has been very adequately addressed  by @Opus 17 .

3. I have personally transferred  more than US$200K to my wife's bank account ( she is the only holder of the account) for purchasing a property and with zero query either from the treasury or the IRS or the banks involved. Some of the amounts  were below US$10,000, while others were  multiples of US$10,000. Obviously the  transferring bank in the USA wanted to know the purpose of the transfer  , they surely raised the SARs but that is it.

I hope this has satisfied your query completely.

pk

[Opus 17]

@pk 

1. I have found no articulations  either by the US treasury or the IRS regarding non-taxability of already taxed monies  being transferred abroad, except for interactions with directly or indirectly banned / notified  entities/ persons. Thus my position that transfers to your spouse  or to a joint bank account in Japan is valid.

I think your answer may be confusing (it is to me).

As I read section 2523, a gift made to a spouse who is not a citizen, is subject to the gift and estate tax, regardless if the money was already taxed.  The blanket tax exemption for gifts to spouses does not apply.   In place of the blanket exemption for spouses, there is an annual exclusion limit which is $164,000 for 2022.  Gifts over that amount are subject to reporting on form 709, and may be taxable if the lifetime gifts of the donor are more than $12,060,000.

So the gift is technically taxable, even though tax is rarely actually owed because of the annual and lifetime deduction amounts.

We have to make sure we are separating the ability to transfer the money, and the tax requirement.  It is legal to transfer money; the taxpayer may be required to file form 709.  The IRS will not jump in the middle of the transaction and collect tax, the reporting is "voluntary" or at least on the honor system.  

[pk]

@Opus 17 , I have no issue with your gift and all the articulation on this .  As I said , I am not looking at this as a gift --- just as monies to live/ maintain a house in Japan.  You are the expert on gift  aspect of the issue.

What I was pointing out that  under California Law and even Mexican law a wife owns half of all marital property  and can actually exercise it at any time --- thus when I transferred  monies to my wife's bank in Mexico  to buy a property it was not a gift -- either joint purchase  or her exercising her right to marital asset.  I was just pointing out that  within the particular banks  rules one can transfer large sums abroad with   really no need for  709  ( of course depending on the actual facts and circumstances ).  The reason I had to do it that way because as a  foreigner, owning property in Mexico  is expensive.  Anyways , I digress . Peach be with you, my friend.

pk

[v4r3l4]

@Opus 17 

Understood, thank you for the clarification.

[v4r3l4]

@pk 

So just so I'm clearly understanding what your saying. As long as I am transferring money to my spouse for other purposes rather than just a gift ( providing for my spouse/ family or purchase a property ). There is no limit to the amount I can transfer without having to report it to the IRS?

Where are you getting this reference from or is it just based on past experience?

[Opus 17]

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@v4r3l4 wrote:

@pk 

So just so I'm clearly understanding what your saying. As long as I am transferring money to my spouse for other purposes rather than just a gift ( providing for my spouse/ family or purchase a property ). There is no limit to the amount I can transfer without having to report it to the IRS?

Where are you getting this reference from or is it just based on past experience?

---

At this point, if you are transferring 6 figures to your  non-citizen overseas spouse, you need to consult a professional tax advisor who will represent you before the IRS if they get it wrong.

What I think @pk is basically saying is, "my money already belongs to my spouse, so any money I put in her name is not a gift."

That's a very narrow splitting of hairs and I would be very cautious.  It may not be true under all circumstances. @pk talks about the laws of Mexico and California, we don't know where you live or what state laws you live under.   Just as an example, California's community property law says community property is "all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in the state."  If your wife is not domiciled in California, then your wages may not automatically be her joint property.

Then you also have to get around the plan language of section 2523, which describes in specific detail what happens when you transfer property to a spouse.

https://www.law.cornell.edu/uscode/text/26/2523

Plus, if marital property was always automatically joint property, so moving property around was not a gift, there would be no reason to even write the law the way it is written. 

If you plan to transfer more than $164,000 and you plan to not report it on form 709, then you really need to talk to a professional who will defend you if the IRS comes to a different conclusion.  

[v4r3l4]

@Opus 17 

Understood, that makes sense to me. Thank you once agian for your responses and references.