Cross-border tax planning splits into five clusters. Jump to yours.
- Cross-border lending
A foreign lender at 0% US tax on interest. Deep dive: the portfolio interest exemption. - Moving to the US
Reset basis and clear the traps before the date: pre-immigration tax planning. - Leaving the US
The deemed-sale exit tax, and the 40% your US heirs pay if you leave covered. - Foreign investments and pensions
PFICs, foreign pensions, trusts, and companies. Start with PFIC and Israeli funds. - US real estate for foreign buyers
The 15% withholding, and how title decides the estate tax: FIRPTA withholding.
The estate side (QDOTs, non-resident estate tax, cross-border wills, foreign inheritances) lives at international estate planning; the forms side (FBAR, FATCA, 3520, 5471) at foreign account reporting.
Who This Is For: Five Cross-Border Situations
Five situations bring people to this page, and they share one feature: by the time a tax return is filed, the result is already decided. What is left to choose is the structure, and the structure has a deadline.
- You are a foreign investor lending into or buying US real estate. The difference between a 0% US tax rate and a 40% estate exposure is the paperwork signed at the start.
- Your family is moving to the US. The moves that save real money, resetting basis and clearing foreign structures, only exist before your residency date.
- You are an American or green-card holder leaving the US. Covered-expatriate status is measured on a single day, and it drives everything that follows.
- You are an American abroad, including olim in Israel, with local investments and retirement money. The ordinary funds and pensions around you carry punitive US regimes your bank never mentions.
- You are the US child or heir of someone who renounced. Gifts and inheritances can arrive with a 40% tax attached, and the person who pays it is you.
Each cluster below gives you the short version and the number that matters, then hands you to a page that goes deep on just that question.
Cross-Border Lending: The Portfolio Interest Exemption
A foreign investor who wants US real-estate returns usually thinks about buying. Owning has a steep price: US tax on the rent, 15% of the gross price withheld at sale, and a US estate tax at death with only $60,000 exempt. Lending against the same property flips all of it. Under US law, interest paid to a foreign lender on a properly structured loan (a registered note, a fixed or index-tied rate, a Form W-8BEN on file, a lender unrelated to the borrower) is taxed at 0%, and the note itself sits outside the lender's US estate. The lender holds a first mortgage, collects interest the US does not touch, and files essentially nothing.
The catch is a bright line. The moment the loan shares in the deal's upside, a profit share, an equity kicker, a right to a slice of the appreciation, the law stops treating it as a simple loan and every protection falls at once: the 0% rate, the estate exclusion, and the shield against the foreign-owner real-estate rules, with no partial credit. What the clean structure avoids is a default 30% withholding on every interest payment, which the US borrower is personally liable to collect. This is drafting work, done before the money is wired, and it has its own page: see the portfolio interest exemption.
Moving to the US: Plan Before the Clock Starts
Move to the US, or activate a green card, and worldwide US tax starts on a set date, sometimes with a single landing at the airport. Everything you own carries its history with it: the gain that built up in a foreign portfolio or company over twenty years becomes US-taxable gain when you sell as a US resident, unless you reset it first. A nonresident generally pays no US tax on selling foreign assets, so selling and repurchasing before the start date locks in a fresh cost basis at no US cost. Do nothing and the step-up everyone assumes is automatic never happens.
The same date flips other switches. A foreign company you own can start producing US tax on earnings you never receive, a foreign fund becomes a punitive holding, and a foreign trust has to be funded more than five years ahead to stay outside the net. A second, slower clock then moves your estate: a non-domiciliary is taxed on US assets above a $60,000 exemption, while a US domiciliary is taxed worldwide but with a $15 million exemption for 2026, and there is often a narrow window between the two clocks to move wealth. All of it is timed against the calendar, which is why the page to read before you book a flight is pre-immigration tax planning. If Florida is the destination, the declaration of domicile is part of the landing.
Leaving the US: The Exit Tax and the 40% That Follows
Leaving is taxed too. Give up US citizenship, or a green card held in at least 8 of the last 15 years, and if you are what the law calls a covered expatriate, the US treats everything you own as sold the day before you go and taxes the gain above a $910,000 exclusion for 2026. Covered status takes only one of three things: a net worth of $2 million or more (a figure frozen since 2008 that a paid-off home plus a retirement account can clear), an average US tax bill above $211,000, or missing five clean years of tax compliance. The quiet bruiser is the retirement money: a traditional IRA is treated as cashed out entirely, at ordinary rates, and the exclusion does not shelter it.
The half people never hear about lands on the family. Once you are covered, every future gift or inheritance you leave to a US citizen or resident carries its own 40% tax, paid by the recipient on Form 708, for the rest of your life, with no step-up in basis to soften it. Avoiding covered status before the date, or planning the recipient side when you cannot, is the real work. The expatriate's side is our US exit tax guide; the US heir's side has its own page, the 40% tax on gifts from a covered expatriate.
Signing or moving soon?
A free 30-minute consult places you in the right cluster, lays out what has to happen before the date, and tells you who does which piece, before anything locks in.
Book your free consultForeign Investments: The Traps in What You Already Own
For an American abroad, the most dangerous holdings are the ordinary local ones. A foreign pooled fund (an Israeli mutual fund, ETF, or kupat gemel is the textbook case) is a PFIC in US eyes, taxed at the top ordinary rate for every year you held it, plus a compounding interest charge that routinely eats more than half the gain, with an IRS form for each fund every year. See PFIC and Israeli funds. Retirement money fares little better: a foreign pension gets none of the deferral a 401(k) enjoys, so the US can tax the growth inside a keren pensia, kupat gemel, or keren hishtalmut while the money just sits there. See how the US taxes a foreign pension.
Trusts and companies bring their own regimes. A foreign trust that piles up income hands its US beneficiary a throwback tax with a compounding interest charge, and the missed form alone starts at the greater of $10,000 or 35% of the amount involved. See how the US taxes a foreign trust. Own part of a foreign company and Form 5471 can cost $10,000 a year with no tax due at all, while a company US owners control can be taxed to you on earnings that never reached your pocket. See who must file Form 5471. Every one of these is cheapest to handle before you buy, fund, or inherit, and every one still has a fix after.
The Olim Window: Roth Conversions After Aliyah
One cross-border window works in your favor. A new immigrant to Israel gets ten years in which foreign income, including a US retirement account, is exempt from Israeli tax. Converting a traditional IRA to a Roth inside that window, timed to a low-US-income year, can cost single-digit US tax and often nothing in Israel: in one worked example, a $50,000 conversion costs roughly $4,000 of US tax and zero Israeli tax. What you buy is growth the US never taxes again, tax-free withdrawals, and no forced payouts at 73. The catch is that the Israeli window and your low-income years rarely line up on their own, and a conversion cannot be undone, so the timing is the entire decision. See the Roth conversion for olim, and how it fits the broader olim plan.
US Real Estate: FIRPTA and How You Take Title
For a foreign buyer or seller of US property, two numbers frame everything. Selling as a foreign person means the buyer must hold back 15% of the gross price for the IRS, $150,000 on a $1,000,000 sale, even when the actual tax is a fraction of that; a withholding certificate filed before closing can cut it to the real number. And dying as a foreign owner means US estate tax with only $60,000 exempt: on a $2,000,000 condo held in your own name, the bill runs about $733,000.
Both results are set by the ownership structure chosen at the purchase, which is why the time to plan is before the closing, not at the sale or after a death. See FIRPTA withholding for the sale side and US estate tax for non-resident aliens for the death side. An investor who would rather skip the category entirely can often lend instead of own, and keep the same money working at a 0% US rate.
Reporting and Compliance: The Paperwork Side
Everything above is structuring: choosing the shape of a deal or a move before it happens. The paperwork that follows is its own world, with its own penalties. The FBAR is due once your foreign accounts top $10,000 combined, Form 8938 starts at higher thresholds, and the foreign gift, trust, and company forms each carry penalties that can dwarf the tax, starting at $10,000. That whole map, which forms you owe and how they overlap, lives on our foreign account and asset reporting hub. If years of forms were missed innocently, the streamlined filing procedures can fix it at a low or zero penalty. Structure and reporting are two halves of one picture, and we screen both at the same consult.
How We Work, and When We Co-Counsel
Cross-border tax runs deep, so we are honest about where our role sits. The screening that places you in the right cluster, the structuring documents (the registered note and mortgage, the pre-move timeline, the title-holding instructions), the Florida side, and the coordination with your estate plan are handled here, on fees quoted up front. For treaty positions, exit-tax modeling, PFIC computations, and high-net-worth inbound structures we co-counsel an international tax advisor, and Israeli tax questions go to Israeli counsel. We do not prepare tax returns; our job is to make sure the return your preparer files reports a structure worth reporting.
The estate side of a cross-border life, a QDOT for a non-citizen spouse, the non-resident estate tax, cross-border wills, and foreign inheritances, lives on our international estate planning hub, and the two get planned together. Most of this work runs remotely, by phone and video, for clients in Florida, out of state, and abroad, including the many Americans in Israel. The first and most valuable step is the screen, because it decides everything that follows.
Frequently Asked Questions
Can a Foreign Lender Really Pay Zero US Tax on Interest?
Yes, under current law and structured correctly. US law exempts the interest a foreign lender earns on a qualifying loan into US real estate or a US business: the note must be in registered form, the rate fixed or tied to an index rather than to the borrower's profits, the lender must hold less than 10% of the borrower, and a Form W-8BEN must be on file before the first payment. Done right, the interest is taxed at 0% and the note sits outside the lender's US estate. Miss a condition and the default is a 30% withholding the US borrower must take out of every payment, so the drafting is the whole protection.
When Should I Plan, Before or After I Move?
Before, and it is not close. A nonresident generally pays no US tax on selling foreign assets, so the cost basis of an appreciated portfolio or company can be reset for free before your residency starting date; the same sale a day after the date is US-taxable. The pre-arrival window is also when a foreign company or fund gets cleaned up, and a foreign trust has to be funded more than five years ahead to stay outside the net. The same logic runs in reverse when you leave: covered-expatriate status is measured on the day you expatriate, so every lever has to be pulled before that date.
What Is the Exit Tax If I Give Up Citizenship or a Green Card?
If you are a covered expatriate, US law treats everything you own as sold the day before you go and taxes the gain above a $910,000 exclusion for 2026. Covered status takes only one of three things: a net worth of $2 million or more (a figure frozen since 2008), an average US tax bill above $211,000, or the inability to certify five clean years of tax compliance. A traditional IRA is treated as cashed out entirely, at ordinary rates, and the exclusion does not shelter it. A green card held in at least 8 of the last 15 years runs the same tests as citizenship.
Why Are My Israeli Investment Funds a US Tax Problem?
Because to the IRS, almost every Israeli pooled fund (a mutual fund, an ETF, a kupat gemel, a keren hishtalmut) is a PFIC, a passive foreign investment company, and the default PFIC tax is punishing by design. Your gain is taxed at the top ordinary rate for every year you held the fund, with a compounding interest charge added on top, and on a fund held a decade the combination routinely eats more than half the gain. Your Israeli bank will not warn you, because it does not advise on US tax. The fix is to stop adding money, inventory what you hold, and sequence an orderly exit into US-domiciled holdings.
How Should a Foreign Buyer Take Title to US Real Estate?
That decision, made at the purchase, sets both taxes that matter. Buy in your own name and a later sale carries a 15% withholding on the gross price, and death carries US estate tax with only $60,000 exempt: on a $2,000,000 condo the bill runs about $733,000. The right structure depends on whether the property is for personal use or investment, the budget, and who inherits. Some investors skip the category entirely by lending against US property instead of owning it, which can put the same money to work at a 0% US tax rate. We screen this before the closing, not after.
Do You Do the Tax Returns?
No, and we are honest about that line. The screening, the structuring documents (a registered note and mortgage, a pre-move timeline, title-holding instructions), the Florida side, and the coordination with your estate plan are handled here, on fees quoted up front. The returns themselves, treaty positions, exit-tax modeling, PFIC computations, and high-net-worth inbound structures are co-counseled with an international tax advisor or a cross-border CPA, and Israeli tax questions go to Israeli counsel. We tell you up front which pieces your matter needs, so you never pay for the wrong tool.
Is This Different From International Estate Planning?
They are two halves of one picture, planned together but built on different pages. This hub covers the tax structure of a cross-border deal or move: lending, immigrating, expatriating, foreign holdings, and how a foreign buyer takes title. The estate side, a QDOT for a non-citizen spouse, the non-resident estate tax and Form 706-NA, cross-border wills, and reporting a foreign inheritance, lives on our international estate planning hub. Most cross-border clients need something from each, which is why one consult screens both.
What If I Already Signed or Already Moved?
There is almost always damage control, it is just more expensive than planning would have been. Over-withheld FIRPTA money can be recovered on a US return. Israeli funds already owned get an inventory and a sequenced exit rather than a panicked sale that detonates the whole charge in one year. Missed forms usually have a streamlined or delinquent path at a low or zero penalty. Even a completed move to the US leaves the domicile clock, gifting windows, and the estate side to plan. The one thing that never helps is waiting longer.
Common Situations
The Israeli investor who lent instead of buying. An investor in Tel Aviv wanted a share of a Florida development. Buying a unit meant US tax on the rent, 15% of the gross price withheld at sale, and a US estate exposure his family would inherit. He lent to the developer's company instead, on a fixed-rate registered note secured by a first mortgage, with a Form W-8BEN on file: 0% US tax on the interest and a note outside his US estate. When the developer later offered a small share of project profits as a sweetener, the answer was no, because that one clause would have collapsed every protection at once.
The founder moving to Miami. A founder with an appreciated foreign company planned to activate her green card in the spring. While she was still a nonresident, the gain in her portfolio was outside US reach, so she reset the basis by selling and repurchasing, restructured the company with co-counsel, and set the landing date around the plan. The same moves a month after arrival would have been taxable events, and the difference ran well into six figures.
The US daughter of a father planning to renounce. A father in Israel with a net worth just above $2 million intended to give up his US citizenship. As a covered expatriate, every future gift or inheritance to his US daughter would have carried a 40% tax that she, not he, would pay. Lifetime gifting before the renunciation date brought him under the threshold, so he expatriated uncovered and her inheritance stays clean.
Sources of Law
- Cross-border lending: 26 U.S.C. §871(h) and §881(c) (the portfolio interest exemption: registered form, the 10%-owner bar, the contingent-interest bar, Form W-8BEN before the first payment); §2105(b)(3) (a qualifying debt obligation is not US-situs for a non-resident's estate, with a carve-back for contingent interest); Treas. Reg. §1.897-1(d) (an interest "other than solely as a creditor" is a US real property interest); default 30% tax and withholding, §871(a) and §1441.
- Moving to the US: 26 U.S.C. §7701(b) (the green-card and substantial-presence residency tests and the residency starting date); §679(a)(4) (the 5-year pre-immigration foreign-trust lookback); non-domiciliary estate tax, §§2101 to 2106 (the $60,000 exemption via the $13,000 credit, §2102(b)(1)); domiciliary exemption, §2010 ($15,000,000 for 2026).
- Leaving the US: 26 U.S.C. §877A (the deemed-sale exit tax; $910,000 exclusion for 2026, Rev. Proc. 2025-32); §877(a)(2) (the covered-expatriate tests: $2,000,000 net worth, $211,000 average tax for 2026, and the 5-year certification, Form 8854); §877(e) (long-term residents, 8 of 15 years); §2801 (the 40% tax on covered gifts and bequests to US recipients; Form 708).
- Foreign holdings: PFIC, 26 U.S.C. §§1291 to 1298 (Form 8621); foreign pensions, §402(b) and the US-Israel Income Tax Treaty (1975), Art. 6(3) (the saving clause); foreign trusts, §§6048 and 6677 (Forms 3520 and 3520-A; greater of $10,000 or 35%) and the throwback rule, §§665 to 668; foreign corporations, §6038 (Form 5471, $10,000 per form) and Subpart F, §§951 to 957.
- The olim Roth window: 26 U.S.C. §408A (Roth conversions); §401(a)(9) (required minimum distributions at 73); Israel's new-immigrant exemption, Income Tax Ordinance §14 (an Israeli-law question, confirmed with Israeli counsel).
- US real estate: FIRPTA, 26 U.S.C. §§897 and 1445 (15% gross withholding; Forms 8288, 8288-A, and 8288-B); non-resident situs and estate tax, §§2103 to 2105 and the §2001(c) rate schedule.
- Reporting: 31 U.S.C. §5314 and 31 C.F.R. §1010.350 (the FBAR, $10,000 aggregate); 26 U.S.C. §6038D (Form 8938); IRS Streamlined Filing Compliance Procedures. irs.gov (retrieved 2026-07-16)
Updated on July 16, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate planning and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about US law, not legal or tax advice, and does not create an attorney-client relationship. Cross-border tax is technical and fact-dependent; for treaty positions, exit-tax modeling, PFIC computations, and the largest inbound structures we co-counsel an international tax advisor, and Israeli tax is handled by Israeli counsel. Federal figures are adjusted periodically and may change. Your result depends on your specific facts.