I am considering renouncing my US citizenship

Are you unsure whether you should renounce your US citizenship? It’s a significant and personal decision that comes with both advantages and disadvantages, as well as potential legal and tax implications.

At Americans Overseas, we provide clear, objective information to help you make the best decision for your situation. We don’t offer advice but aim to guide you through the pros, cons, and process of renouncing US citizenship.

What Does Renouncing US Citizenship Mean?

Renouncing US citizenship means voluntarily giving up your status as a United States citizen. This process includes completing official forms, paying the renunciation fee of $2,350, and attending an appointment at a US Embassy or Consulate.

It is irreversible, so you must consider all factors before making your decision.

Benefits of Renouncing US Citizenship

If you choose to renounce your US citizenship, here are the possible advantages:

• End of Tax Obligations: After filing your final US tax return and completing Form 8854, your future tax declaration obligations in the US will end. This includes reporting foreign income, assets, and bank accounts.
• Compliance Freedom: By renouncing, you no longer need to comply with burdensome reporting requirements like the FBAR (Report of Foreign Bank and Financial Accounts) and FATCA obligations.
• Banking Freedom: Once you provide your CLN (Certificate of Loss of Nationality) to your bank, your financial accounts will no longer be reported to the IRS.
• Financial Simplification: Avoid the complexities and costs of filing US tax returns while living abroad.

Note: To renounce, you must be tax compliant for the previous 5 years. Failure to file your final tax return could result in severe penalties of $10,000 or more.

Disadvantages of Renouncing US Citizenship

There are also significant downsides to giving up US citizenship:

1. Irreversible Decision

Renouncing citizenship is permanent. If you regret your choice, regaining US citizenship can be nearly impossible.

2. Loss of Benefits

• You cannot pass on US citizenship to children born after renunciation.
• Travel to the US may require a visa. ESTA-free travel is often denied to those who renounced US citizenship. This can complicate visits for work, internships, or family.

3. High Costs

• The current renunciation fee is $2,350, making it a costly decision. There is speculation that this fee may drop in the future, but no confirmation exists yet.

4. Public Disclosure

• Your name will appear on a publicly available list of individuals who have renounced US citizenship that year.

5. US Military Obligations

• Renunciation does not exempt you from prior obligations, such as compulsory military service if applicable.

6. Difficulty Returning to the US

• You may face challenges obtaining a US visa for travel, study, or business. Visas are not guaranteed and can be denied on the grounds that you voluntarily relinquished citizenship.

Should I Renounce My US Citizenship?

If you are unsure, weigh the pros and cons of renouncing US citizenship carefully:

Advantages of Keeping Your US Citizenship

• Freedom to Travel and Work in the US: You can live, work, and study in the United States without restrictions.
• Access to Benefits: Retain eligibility for US protections, Social Security, and other government benefits.
• Avoid Renunciation Costs: Save the $2,350 renunciation fee.
• Voting Rights: Maintain your right to vote in US elections.

Disadvantages of Keeping US Citizenship

• Tax Obligations: You must file annual US tax returns and may owe taxes, even if you live abroad.
• Banking Restrictions: Some foreign banks may limit services to US citizens due to FATCA reporting requirements.
• FBAR Filing: You must disclose foreign bank accounts exceeding $10,000.
• Mandatory US Passport Use: US law requires citizens to enter and exit the country using a US passport.

If you keep your US citizenship, what are the possible disadvantages?

• You have an annual tax declaration obligation and in some cases also a tax payment obligation
• You cannot use all banking/-investment products that your bank or financial institution offers
• Your bank details and balances are shared annually with the IRS
• You must travel in and out of America on an American passport

How to Renounce US Citizenship

If you decide to renounce your US citizenship, the process involves the following steps:

1. Tax Compliance

• File tax returns for the past 5 years and complete your final return, including Form 8854.

2. Prepare for Your Appointment

• Schedule an appointment at your local US Embassy or Consulate.
• Bring necessary documents, including proof of US citizenship and tax compliance records.

3. Pay the Renunciation Fee

• The current cost to renounce US citizenship is $2,350.

4. Attend Your Renunciation Appointment

Formally declare your intent to renounce. You will receive a Certificate of Loss of Nationality (CLN).

How Long Does It Take to Renounce US Citizenship?

The time to complete the renunciation process can vary:

• Scheduling an appointment at a US Embassy may take several months.
• Processing time for your CLN can range from a few weeks to several months.

What Happens After You Renounce US Citizenship?

• You must file your final US tax return, including Form 8854, to confirm compliance.
• Your bank will no longer share financial details with the IRS after you provide the CLN.
• You may still need a visa to travel to the US.

What is the right moment to take action?

There are currently various voluntary disclosure programs, such as the Streamlined Procedure and the Relief Procedure. Both procedures have as yet no end date, which means that it is not known when they will end.

Are you unsure whether you need to take action now? Do you want to go through your personal situation? If you register via the contact form, we will gladly look at your situation with you.

Contact us for more information

Sources:

• IRS Renounce US citizenship Expatriation tax
• What you need to know about the US exit tax