Form 3520: Reporting a Large Gift From Your Parents

Quick answer (updated October 2026): You file Form 3520 for a gift from parents abroad when gifts from nonresident alien individuals total more than $100,000 in a tax year. Gifts from related people, like your mother and father, are added together. It's an information return, not a tax, but a missed filing can cost 5% of the gift per month, up to 25%.

Your parents in Lahore or Bengaluru just helped with the down payment. Your lender collected the gift letter, cleared the condition and you closed. Six months later, at tax time, a friend asks: "Did you file the 3520?"

This is the step many families miss because it happens long after the closing table. The mortgage file and the IRS file are two separate records of the same gift, and they need to agree. This guide covers who files, how the $100,000 test works when both parents give, deadlines, penalties, and how to keep your loan file and tax file consistent.

Who has to file Form 3520 for a foreign gift

Form 3520 Part IV applies to a US person (citizens, green card holders, and generally anyone who meets the substantial presence test, which includes many H-1B and L-1 holders) who receives gifts from foreign persons. For gifts from a nonresident alien individual, the threshold is gifts totaling more than $100,000 during your tax year.

Key points, as of October 2026:

• It's an information return. You don't owe US tax on the gift itself.

• Once you cross the threshold, you itemize each gift over $5,000.

• The IRS instructions say you must aggregate gifts from foreign nonresident aliens you know or have reason to know are related, or where one acts as a nominee for the other. Mother and father count together.

• Qualified tuition or medical payments made on your behalf aren't treated as gifts. Other payments, such as a wire straight to escrow for your house, should be assumed to count; confirm with your CPA.

Whether you're a "US person" depends on your tax residency, not your visa label. If you arrived recently or have a mid-year move, your CPA will sort that out.

How the $100,000 gift from India test works

Scenario (illustration only)	Total from related donors in one US tax year	Form 3520 required?
Father gives $60,000 in 2026	$60,000	No
Father $60,000 + mother $60,000 in 2026	$120,000 (aggregated)	Yes
Parents give $70,000 in March 2026 and $70,000 in April 2026	$140,000	Yes, same calendar year
Parents give $70,000 in December 2026 and $70,000 in January 2027	$70,000 per year	No, but watch other gifts in each year
Father-in-law gives $110,000 to you alone	$110,000	Yes

The third row trips people up. A March/April split is a useful way to manage India's TCS, because the Indian financial year runs April to March (see TCS on gifts to your child in the USA). But both dates fall in the same US calendar tax year. Planning around one country's calendar doesn't help with the other.

Married couples

If the gift goes to both of you, how it's split between spouses, and whether you file one form or two, is a question for your CPA. The instructions allow joint Form 3520 filings in limited trust situations; for Part IV gifts, get advice rather than guessing. What matters for your mortgage is that the gift letter names the right recipients and the amounts match what you report.

Talk to a loan officer who's seen this before: We'll structure the gift paperwork for your loan so it lines up with what your CPA reports later. Book a free call.

Form 3520 due date and penalty

For calendar-year individuals, Form 3520 is due on April 15 of the following year, the same day as your income tax return. If you extend your income tax return, the 3520 deadline extends to October 15. US citizens and residents living abroad get until June 15 with an attached statement.

It's filed separately from your Form 1040, at the address in the instructions, not attached to the return.

The penalty under IRC section 6039F: 5% of the amount of the foreign gift for each month the failure continues, capped at 25%. No penalty applies if the failure was due to reasonable cause and not willful neglect.

Unreported gift	Penalty after 1 month (5%)	Maximum penalty (25%)
$120,000	$6,000	$30,000
$150,000	$7,500	$37,500
$250,000	$12,500	$62,500

Those numbers are why this deserves a calendar reminder the day you close. If you've already missed a year, don't panic and don't ignore it. A CPA experienced with foreign gift reporting can advise on the reasonable-cause route.

Your mortgage file vs. your IRS file: make them match

The gift shows up in two places, and both should tell the same story.

In the mortgage file (Fannie Mae B3-4.3-04):

• A signed gift letter with donor name, relationship, dollar amount, and a statement that no repayment is expected

• Evidence the donor had the funds and that they transferred (to your account or to the closing agent)

• Funds converted to dollars and held in a US or state-regulated institution before closing, under the foreign asset rule

In the IRS file:

• Form 3520 Part IV listing each gift over $5,000 once the threshold is crossed

• Possibly FBAR or Form 8938 if you also hold foreign accounts; see FBAR, FATCA and your mortgage

Where families get into trouble: the gift letter says $150,000 but only $95,000 is reported, or the "gift" was really a loan the family expects back. A loan isn't a gift, either for the lender or the IRS. If repayment is expected, read gift vs. loan from parents before you sign anything.

A hypothetical walk-through

Say Imran and Sana, green card holders in Sugar Land, receive $80,000 from Imran's father in Karachi and $50,000 from Sana's parents in Lahore toward a $550,000 home in 2026. (Illustration only.)

• Mortgage side: two gift letters, two sets of donor bank statements, two wire confirmations. The lender clears both before closing.

• IRS side: Imran's father is not related to Sana's parents, but who received which gift, and whether each spouse crosses $100,000, depends on how the gifts were given and split. Their CPA reviews the gift letters and wire records and decides what to file by April 15, 2027.

• The habit that helps: they save the gift letters and wire confirmations in one folder and hand it to their CPA in January.

For the full mortgage side of parental gifts, see gift money from India for a down payment. If the money comes from extended family, check who qualifies as a donor in gifts from an uncle, cousin or in-laws.

What the rules actually say

• IRS Instructions for Form 3520 (Rev. December 2025): Part IV reporting for gifts from nonresident alien individuals totaling more than $100,000 in a tax year; aggregate gifts from related foreign persons; due the 15th day of the 4th month after year-end (April 15), extended to October 15 with an income tax extension, as of October 2026.

• IRC section 6039F: penalty of 5% of the foreign gift per month of failure, up to 25%, unless reasonable cause.

• Fannie Mae Selling Guide B3-4.3-04 (02/04/2026): gift letter and transfer documentation; donors need not be US persons and funds need not originate in a US account.

• Fannie Mae Selling Guide B3-4.2-05: foreign funds must be in US dollars in a US or state-regulated institution and verified before closing.

Frequently Asked Questions

Q: Do I need to file Form 3520 for a gift from my parents in India?
A: If gifts from nonresident alien individuals total more than $100,000 in your tax year, yes. Gifts from related people, like both parents, are added together. Below that threshold, Part IV generally isn't required. Confirm your tax residency and totals with a CPA.

Q: Do I pay tax on a $100,000 gift from my parents abroad?
A: Generally no. Form 3520 is an information return; it reports the gift but doesn't create US income tax on it. The penalty for not filing can be significant, so the filing matters even though no tax is due.

Q: What is the penalty for not filing Form 3520 for a foreign gift?
A: 5% of the gift amount for each month the failure continues, up to a maximum of 25%, unless the failure was due to reasonable cause and not willful neglect. On a $150,000 gift, that maximum is $37,500. Talk to a CPA if you've missed a filing.

Q: When is Form 3520 due?
A: For calendar-year individuals, April 15 of the year after the gift. If you extend your income tax return, the Form 3520 deadline extends to October 15. It's mailed separately from your Form 1040.

Q: Does my mortgage lender check whether I filed Form 3520?
A: Your lender typically doesn't require Form 3520 to close. They need the gift letter, donor statements and transfer proof. But the amounts in your loan file and your IRS filings should match, so treat both as one record of the same gift.

Get your money-from-India sourcing plan with gift paperwork that holds up later

Tell us who's giving, how much, from which country, and your target closing month. We'll send back a money-from-India sourcing plan with the gift letters, donor documents and wire timeline your lender needs, organized so you can hand the same folder to your CPA at tax time. We shop 150+ wholesale lenders and handle family gift files from South Asia every week. Book a free 15-minute call at /contact, start your application at /apply, or call 713-366-4668.

Masala Loans is a brand of Matador Lending, LLC (NMLS #2072896). Written by Apurva Sanghavi, President, NMLS #227127. Equal Housing Opportunity. This article is general education, not tax, legal or immigration advice — consult a qualified CPA, attorney or immigration lawyer for your situation. Program availability, rates and terms vary by lender and borrower and are subject to change; not a commitment to lend.