Do I have to pay exit tax if I renounce my citizenship?

2 min

If you are a US citizen and you decide to renounce your US citizenship this can still have substantial tax implications for you. The US imposes an ‘Exit Tax’ when you renounce your citizenship if you meet certain criteria.

Generally, if you have a net worth over $2 million the exit tax will apply to you.  This tax is based on the inherent gain (in dollar terms) on ALL YOUR ASSETS (including your home). You will also be taxed on all your deferred compensation—such as pensions at the time of expatriation.

The exit tax will also apply to you, even if your net worth is below $2 million if you have not complied with your US tax obligations for the last five years. The $2 million trigger will not apply to certain individuals who are dual citizens at birth. However, the tax will still be imposed if they have not met the five-year tax compliance test.

Green Card Holders and the Exit Tax:

The exit tax USA is also imposed on Green Card holders who have held a green card for 8 out of the last 15 years (referred to as ‘long-term residents’). This can mean that green card holders who have not formerly surrendered the green card are ‘stuck’!!! They remain subject to US Income Tax but cannot afford to surrender the card because of the exit tax they will have to pay.

Need more information about the American exit tax?

We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother.

When we heard about the US tax system for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fined or pick up other problems?), and panic (what should I do?). It is (unfortunately) true that there is an additional American tax levy. But there’s no information from the local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.

That’s why we started this initiative to help people from all over the world by providing proper information about the US tax system to avoid unnecessary panic and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your exit tax obligations.

Contact us for more information