Form 706 Schedule P – Credit for Foreign Death Taxes Guide

Editorial Standards

How we research, review, and update this guide

Every Accountably guide is researched against primary IRS sources, reviewed by a U.S. CPA, and refreshed as guidance evolves. Read our Editorial Guidelines to see how we source, fact-check, and update our content.

Foreign probate moves on its own schedule, and that is exactly where Schedule P gets missed. The credit for foreign death taxes offsets U.S. estate tax for taxes another country levied on property that also sits in the U.S. gross estate under IRC §2014, but you cannot compute it until the foreign assessment arrives. Wait for foreign probate to finish before you request the figures and the U.S. nine months deadline can be on top of you.

The credit is capped at the smaller of the foreign death tax actually paid or the U.S. estate tax attributable to that same property, and it has to be supported by a certified Form 706-CE before it carries to Form 706 line 13. If a treaty applies, check whether it offers better terms than the statute, and remember the credit can still be perfected by amended return within 4 years.

Key Takeaways

What it does: Schedule P computes the credit against U.S. estate tax for death taxes paid to foreign governments on property that is included in both the U.S. gross estate and the foreign taxing jurisdiction’s estate or inheritance tax base.
Who files it: Estates filing Form 706 that have paid or are required to pay death taxes to a foreign country on property also included in the U.S. gross estate under IRC Sections 2014 or 2053(d). An executor elects either the Section 2014 credit or the Section 2053(d) deduction for the same foreign death tax, never both.
Key deadline: The credit must be claimed on a timely filed Form 706 (due nine months from the date of death, extendable by six months); the credit may be claimed or perfected by amended return within 4 years after Form 706 is filed (IRC §2014(b)).
Treaty vs. statute: The credit may be available under IRC Section 2014 (statute) or under an applicable U.S. estate tax treaty – always check whether a treaty provides more favorable terms before defaulting to the statutory calculation.
Proportionality limit: The credit is limited to the lesser of the foreign death tax attributable to the property and the U.S. estate tax attributable to the same property – preventing a credit that exceeds the U.S. tax on the double-taxed property.
SOP tip: Request documentation of foreign death taxes as part of the initial estate inventory process; waiting for foreign probate to conclude can delay the credit computation to a point where the Form 706 deadline is at risk.

What Form 706 Schedule P Is and When to Use It

Schedule P – Credit for Foreign Death Taxes – is the mechanism Congress provided to prevent double estate taxation on assets included in both a U.S. gross estate and a foreign country’s estate or inheritance tax base. Without this credit, a U.S. citizen or resident who dies owning foreign real estate could face estate tax from the foreign country where the property is located AND U.S. estate tax on the same property’s value. Schedule P eliminates or reduces that overlap.

The statutory basis for the credit is IRC Section 2014 (for deaths occurring before 2005, Section 2053(d) also applied in some treaty situations). The credit is available whether or not the foreign country has an estate tax treaty with the United States, though the calculation methodology and available relief may differ between treaty and non-treaty situations.

When Schedule P Is Required

Schedule P must be completed when the estate includes property that is subject to foreign death taxes (estate taxes, inheritance taxes, legacy taxes, or succession taxes) imposed by a foreign country, AND that same property is also included in the U.S. gross estate. The credit is computed separately for each foreign country that imposes death taxes on the estate’s property.

Property Included in Both Estates

The “double inclusion” requirement is the threshold condition: the property must be subject to tax in both jurisdictions. For U.S. citizens and domiciliaries, the U.S. gross estate includes all worldwide assets, so any foreign property that is also subject to a foreign death tax meets the double inclusion test. For nonresident aliens, only U.S. situs property is in the U.S. estate, so the analysis is narrower – and in practice Schedule P does not apply to them at all, because nonresident noncitizen estates file Form 706-NA, which has no Schedule P, and rely on any applicable estate tax treaty for relief.

Treaty vs. Statutory Credit

The United States has estate tax treaties with a number of countries including Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Switzerland, and the United Kingdom. Canada appears on that list, but it has not imposed a federal estate tax since 1972, so no Schedule P credit arises for Canada; cross-border U.S./Canadian relief instead flows through the 1995 Canadian Protocol marital credit reported on Form 706 line 16, not Schedule P. When a treaty exists, the estate may use either the treaty provisions or the IRC Section 2014 statutory credit – whichever provides the greater benefit. Always run both calculations before finalizing Schedule P when a treaty country is involved.

How to Complete Form 706 Schedule P

Schedule P is organized around a foreign-country-by-foreign-country computation. If the estate paid death taxes to multiple foreign countries, a separate Schedule P must be completed for each. The computation involves three limitations: the credit cannot exceed the foreign death tax attributable to the included property, the U.S. estate tax attributable to the same property, or (under the statute) a proportional fraction of the total foreign death tax.

Line / Computation	What to Compute	Practitioner Notes
Foreign country identification	Name of the foreign country imposing the death tax	Use the full country name. Complete a separate Schedule P for each foreign country.
Value of property subject to both taxes	The estate tax value (for U.S. purposes) of property included in both the U.S. gross estate and the foreign death tax base	This is the “double-included” property. Confirm that each asset is actually included in the foreign jurisdiction’s tax base – do not assume that U.S. situs and foreign situs align perfectly.
Total value of foreign property	Total value of all property in the estate subject to the foreign country’s death tax	Used to compute the proportional limitation. This includes property in the foreign estate that may not be in the U.S. estate (e.g., foreign property not included under U.S. situs rules for nonresidents).
Foreign death tax paid	Total foreign death tax actually paid to the foreign country	Must be a finally determined and paid amount – estimated or proposed taxes do not qualify. Obtain official foreign tax assessment documents. Currency conversion required using exchange rate at date of payment.
Proportional limitation computation	(Double-included property value / Total foreign property value) × Foreign death tax paid = Maximum credit attributable to double-included property	This fraction limits the credit to the portion of foreign death tax that relates to the doubly-taxed property – not the entire foreign tax bill.
U.S. estate tax attributable to included property	(Double-included property value / gross estate less the Part 5 items 21 (charitable) and 22 (marital) deductions) × Net U.S. estate tax before credits	This computation requires the net U.S. estate tax figure from Form 706 before this credit is applied. Iterate the calculation if necessary.
Credit amount	Lesser of the proportional foreign tax limitation and the U.S. estate tax attributable to the included property	The credit is the smaller of the two limitations. This prevents the credit from exceeding either what was paid in foreign taxes on the overlapping property or what the U.S. is taxing on that same property.

Currency Conversion for Foreign Death Taxes

All foreign death tax amounts must be converted to U.S. dollars for Schedule P purposes. Use the exchange rate on the date the foreign tax was paid – not the date of death or the date Form 706 is filed. If installment payments were made, each payment is converted at the rate applicable to its payment date. Document the exchange rate source in the workpapers.

Deadlines, Penalties, and Filing Requirements

Schedule P is filed as part of Form 706. The Form 706 deadlines govern, but there are additional timing considerations specific to the foreign death tax credit.

Event	Deadline	Notes
Form 706 with Schedule P	9 months from date of death	Schedule P is filed as part of Form 706; both are subject to the same deadline
Extension to file Form 706	6-month extension available (Form 4768) – extends to 15 months from date of death	Extension extends time to file but not time to pay; interest accrues on unpaid estate tax from the 9-month due date
Claiming the credit when foreign tax is not yet determined	File a protective claim on Form 706 within the filing deadline	If the foreign death tax has not been finally assessed and paid by the Form 706 due date, file a protective claim by indicating the anticipated credit and attaching a statement of facts; the credit can be finalized by amended return when the foreign tax is determined
Amended return to claim or increase credit	Must be filed within 4 years after Form 706 is filed, per IRC §2014(b)	The 4-year extended period to file an amended return for the foreign death tax credit is longer than the standard amended return period – use it when foreign probate is delayed
Late filing penalty	Standard 5% per month on unpaid estate tax; maximum 25%	Reasonable cause exception available; document why any filing delay occurred

The Protective Claim Strategy

When foreign probate proceedings are slow – as they often are in civil law countries where succession must go through local courts – the foreign death tax may not be finally determined before the Form 706 deadline. In that situation, the estate should file Form 706 with a protective claim for the foreign tax credit, noting that the foreign tax is undetermined and will be calculated upon finalization. This preserves the credit claim and allows the estate to file an amended return within the 4-year window once the foreign tax is determined. Small errors create big cleanup – but a tentative credit and the 4-year window after Form 706 is filed let the estate perfect the credit by amended return (IRC §2014(b)), so the credit is not lost simply for want of a protective claim.

Statutory Credit vs. Treaty-Based Relief: The Decision

When the decedent’s estate has a connection to a treaty country, the estate may choose between the IRC Section 2014 statutory credit and the treaty’s estate tax relief provisions. These are not always the same, and the better result is fact-specific.

How Treaty Relief Differs From the Statutory Credit

U.S. estate tax treaties typically address double taxation through one of three methods: a credit system (similar to Section 2014), a deduction system, or an exemption for certain property in one jurisdiction. Some treaties provide exemptions for real property in the country where it is located, which eliminates the double inclusion rather than crediting it. Others provide an allocation of the unified credit between the two jurisdictions. The treaty provisions are often more favorable for treaty-country nationals who die as U.S. residents, where the statutory credit may leave more double taxation in place.

The Election to Apply the Treaty

Choosing to apply a treaty instead of the statute is an election made on Form 706 – typically by attaching a statement identifying the treaty, the relevant provisions being applied, and how the estate is calculating its entitlement. When a treaty applies, the estate computes the credit under both the statute and the treaty and is allowed the larger of the two (IRC §2014(h)). If the treaty provides better relief for some property and the statute for other property, the estate may need to carefully analyze whether it can apply different regimes to different assets or must apply one approach throughout.

Foreign Death Taxes: Country-Specific Considerations

Each foreign country has its own death tax system, and the interaction with U.S. estate tax varies. Practitioners handling international estates need at least a basic familiarity with how the most commonly encountered foreign systems work.

Countries With Inheritance Taxes (Not Estate Taxes)

Many countries – including France, Germany, Japan, and the Netherlands – impose inheritance taxes on the recipient rather than estate taxes on the estate. The Section 2014 credit covers “estate, inheritance, legacy, or succession taxes” imposed by foreign countries, so inheritance taxes qualify. Foreign income taxes, foreign capital gains taxes (including Canada’s deemed-disposition tax on death, which is an income tax, not a death tax, under Rev. Rul. 82-82), and foreign gift taxes do not qualify, and belong on the estate’s Form 1041 with Form 1116 rather than Schedule P. But the computation of the foreign tax paid may require a beneficiary-by-beneficiary analysis rather than a single estate-level figure, which complicates the Schedule P calculation.

Countries That Exempt Certain Property

Some countries exempt specific property categories from death taxes entirely – agricultural land, closely held business interests, or transfers to spouses and children. When foreign property is exempt from the foreign death tax but included in the U.S. gross estate, there is no “double taxation” on that property and no Schedule P credit applies. The credit analysis must be done property-by-property.

Common Mistakes That Slow Things Down

The same handful of errors surface on almost every Schedule P I review, and most of them inflate the credit or strip out the documentation that supports it. Catch these before the return leaves your desk.

1. Crediting the entire foreign death tax. The IRC §2014 credit is not the full foreign bill. It is the smaller of Schedule P line 1 (foreign death tax actually paid) or line 5 (the U.S. estate tax attributable to that foreign-situs property), with the result on line 6 flowing to Form 706 line 13. Claiming the whole foreign tax overstates the credit and invites adjustment. Fix: Run both limits on every Schedule P, carry only the lesser amount to line 6, and keep the proportional math in the workpapers so a reviewer can retrace it.

2. Claiming the credit without a certified Form 706-CE. A foreign tax bill or receipt is not enough. The Instructions for Form 706 require Form 706-CE, the Certificate of Payment of Foreign Death Tax, certified by the foreign tax authority, to support the line 1 amount. Without it, the credit is exposed on examination. Fix: Request Form 706-CE during the initial estate inventory. If the foreign authority will not certify it, file the uncertified Form 706-CE with the IRS along with a statement explaining the refusal, which preserves the claim.

3. Treating a foreign income tax as a death tax. Only estate, inheritance, legacy, or succession taxes qualify for §2014. Canada's deemed-disposition tax at death is an income tax (Rev. Rul. 82-82), not a death tax, and foreign income or capital gains taxes belong on Form 1041 with Form 1116, not on Schedule P. Fix: Confirm the tax type before you build the schedule. For U.S./Canada estates, route relief through the 1995 Canadian Protocol marital credit on Form 706 line 16, not Schedule P.

4. Combining multiple countries on one Schedule P. A separate Schedule P is required for each foreign country that imposed a death tax. National and political-subdivision death taxes from the same country are aggregated onto that country's schedule, but two countries never share one form. Fix: Prepare one Schedule P per country, total the line 6 credit from each, and report the combined figure on Form 706 line 13.

5. Using gross value or the wrong exchange rate. Schedule P line 2 uses the net value of the foreign-situs property (gross value less foreign-situs debts and allocable deductions), and the foreign tax must be converted at the exchange rate on the date it was paid, not the date of death or the date of filing. Fix: Net the foreign-situs debt before you populate line 2, and document the date-of-payment exchange rate and its source in the workpapers per the Instructions for Form 706.

Practical Checklists You Can Reuse

These checklists are copy-paste ready for your firm SOPs and engagement templates. They track the documentation, computation, and post-filing steps the Instructions for Form 706 expect on a Schedule P engagement.

Foreign-asset intake packet

Identify every foreign-situs asset in the gross estate and the country that taxes each one.
Confirm each asset is included in both the U.S. gross estate and the foreign death tax base (the double-inclusion test).
Request Form 706-CE from each foreign tax authority early, before foreign probate closes.
Collect official foreign assessment and payment records, with certified English translations.
Log the date each foreign death tax was paid and the exchange rate in effect on that date.
Screen each foreign tax to confirm it is an estate, inheritance, legacy, or succession tax, not an income or capital gains tax.

Schedule P credit computation

Prepare a separate Schedule P for each foreign country.
Enter the foreign death tax actually paid on line 1 from the certified Form 706-CE.
Net foreign-situs debts before entering the property value on line 2.
Compute the U.S. estate tax attributable to the foreign property for the line 5 limit.
Carry the smaller of line 1 or line 5 to line 6.
Sum the line 6 credit from every country and report the total on Form 706 line 13.
Where a treaty country is involved, run the treaty calculation too and claim the larger relief.

Protective claim and recovery watch

File Form 706 within 9 months of death, or extend with Form 4768.
File a protective claim if the foreign death tax is not finally determined by the filing deadline.
Calendar the 4-year window to perfect the credit by amended return once the foreign tax is fixed.
Confirm the executor elected either the §2014 credit or the §2053(d) deduction, never both.
Set a reminder to notify the IRS within 30 days if the foreign country later refunds any credited tax (IRC §2016).
Verify state death taxes were taken as a deduction on Form 706 line 3b, not on Schedule P.

Keep Schedule P (Form 706) Season From Stalling

Schedule P does not run on a tidy season the way a 1040 does. It is triggered by a death, runs against the 9-month Form 706 deadline (Instructions for Form 706), and depends on a foreign probate court and a foreign tax authority you do not control. With the 2025 basic exclusion at $13,990,000 (Rev. Proc. 2024-40) and a 40% top estate tax rate, the dollars riding on a single foreign death tax credit are large, and the certified Form 706-CE that supports it often arrives late.

The answer is not heroics in month nine. It is a documented intake and review routine that starts the moment an estate with foreign assets lands, so the certified evidence and the credit computation move in parallel instead of in sequence.

Open a Form 706-CE request to each foreign tax authority at intake, not after foreign probate concludes.
Keep one Schedule P per country, with the line 1 foreign tax, the line 5 U.S.-tax limit, and the line 6 credit reconciled before review.
Capture the date-of-payment exchange rate and certified English translations as the records arrive.
Calendar the 9-month deadline, the Form 4768 extension, and the 4-year window to perfect the credit by amended return.
Flag treaty countries so the statutory and treaty calculations are both run before the larger credit is claimed.

That kind of structured, review-protected workflow is exactly what our tax preparation and review teams are built to run, so a complex foreign death tax credit gets documented support and a multi-layer check without burning a senior reviewer's month.

FAQs

What is Form 706 Schedule P?

Schedule P is the Credit for Foreign Death Taxes schedule on Form 706 (United States Estate Tax Return). It computes the credit available against U.S. estate tax for estate, inheritance, legacy, or succession taxes paid to foreign governments on property that is included in both the U.S. gross estate and the foreign death tax base. The credit prevents double taxation on the same assets.

Who needs to complete Schedule P?

Any estate filing Form 706 that has paid, or is required to pay, death taxes to a foreign country on property also included in the U.S. gross estate must complete Schedule P. This applies to estates of U.S. citizens and domiciliaries who owned property abroad. Note, however, that Schedule P is filed only as part of Form 706 by estates of U.S. citizens and residents; nonresident noncitizen estates file Form 706-NA, which has no Schedule P, and depend on any applicable estate tax treaty for double-tax relief instead.

What is the deadline to claim the foreign death tax credit?

The credit must generally be claimed on Form 706, which is due nine months from the date of death (extendable by six months). If the foreign death tax is not yet finally determined at the filing deadline, a protective claim should be filed. The estate then has four years after Form 706 is filed to file an amended return to finalize the credit once the foreign tax is determined.

Is a U.S. estate tax treaty required to claim the credit?

No. The credit is available under IRC Section 2014 regardless of whether the foreign country has an estate tax treaty with the United States. However, when a treaty does exist, the estate should compare the treaty provisions to the Section 2014 statutory credit and use whichever provides greater relief. For some countries – particularly those with inheritance tax systems – the treaty terms may differ significantly from the statutory credit framework.

How is the credit limited when the estate has property in multiple countries?

A separate Schedule P computation must be performed for each foreign country that imposes death taxes on the estate’s property. For each country, the credit is limited to the lesser of: (1) the foreign death tax proportionally attributable to the double-included property, and (2) the U.S. estate tax proportionally attributable to that same property. Countries cannot be combined – the proportional fractions and limitations are computed independently for each.