When are you considered a taxable green card holder (even if you left)

Once you obtain a U.S. Green Card (formally known as Lawful Permanent Resident status), you are automatically considered a U.S. tax resident. This means you are obligated to report and pay taxes on your worldwide income to the U.S. Internal Revenue Service (IRS) — even if you reside permanently outside the United States.

Many people mistakenly believe that only time spent inside the U.S. matters for tax residency. However, the “Green Card test” established by the IRS means that simply holding a valid Green Card – whether or not you physically reside in the U.S. – makes you a resident alien for tax purposes.

Green Card Holders and Tax Obligations

U.S. citizens and Green Card holders must file annual U.S. tax returns (Form 1040) and pay U.S. taxes on all global income. This includes salary, business income, rental income, foreign pensions, and investment gains, even if earned and taxed abroad.

This also includes:

• FBAR (FinCEN 114): You must report foreign accounts if total value exceeds $10,000.
• Form 8938 (FATCA): Required for foreign assets over certain thresholds.
• Form 2555 or 1116: May be used to avoid double taxation through exclusions or credits.

Green Card holders living abroad may also be subject to state taxes depending on ties to a U.S. state.

Even expired Green Cards can still trigger tax obligations unless properly relinquished. Penalties for non-compliance can be significant, especially when foreign accounts and assets are involved.

Relinquishing a Green Card: Tax Consequences

Even if you do not meet U.S. immigration residency requirements, you remain a U.S. tax resident until your Green Card is formally surrendered. This is because U.S. tax law treats Green Card holders as tax residents until they properly abandon that status.

To end your U.S. tax residency, you must:

• Surrender your Green Card at a U.S. embassy or consulate
• File Form I-407 or a formal letter of intent to abandon
• Retain official proof of relinquishment

Failure to complete this process means you remain liable for U.S. taxation – even if you have lived abroad for years.

Even if the individual is not complying with the terms of maintaining the green card for purposes of the US immigration laws, continuing to hold the card still counts for US tax law purposes.

Under the US income tax rules about green card holders,  a foreign individual is considered a “resident alien” (thus subject to worldwide income tax) for any calendar year if the individual is a lawful permanent resident at any time during that calendar year. A lawful permanent resident is defined as an individual who has been lawfully granted the privilege of residing permanently in the United States as an immigrant following the immigration laws.

Mistaken Belief That Green Cards “Expire”

Many Green Card holders assume that once their card “expires,” they are no longer U.S. tax residents. This is incorrect.

Under tax law, Green Card status continues until it is either:

• Rescinded (via court or immigration exclusion), or
• Formally abandoned through Form I-407 or an equivalent process

Until one of these actions is completed, the IRS considers you a U.S. tax resident — regardless of expiration date or time spent abroad.

Form I-407 or Letter of Intent to Abandon Resident Status

The most reliable way to end your U.S. tax obligations is to personally visit a U.S. embassy or consulate and file Form I-407 (Abandonment of Lawful Permanent Resident Status). You will receive a stamped copy, which serves as proof of relinquishment.

If an in-person visit is not possible, you may also send:

• A signed letter of intent to abandon,
• Your original Green Card, and
• Documentation of mailing and receipt

This must be sent via certified mail with return receipt. Retain copies for your records.

Only once this process is complete can you stop filing as a U.S. tax resident.

Key Points for Green Card Holders Considering Relinquishment

• Exit Tax: If you’ve held your Green Card for 8 of the last 15 years, you may be classified as a “covered expatriate” and owe exit tax on your worldwide assets.
  You must file Form 8854 and certify past tax compliance.
• Abandoning your Green Card is irrevocable. Future entry to the U.S. may require a visa.
• Seek professional tax advice before proceeding. Exit tax calculations, asset reporting, and dual-status returns are complex and mistakes can be costly.

Don’t Forget –

• Persons planning to relinquish their green cards should thoroughly understand the rules regarding “expatriation”.  Holding a green card for an extended number of years can make relinquishing the card more complicated from a US tax perspective and, depending on the facts of the case, can result in the imposition of so-called “Exit Tax” liability as well as other US tax consequences.

• Look carefully at the rules for tax filings that are required (for example, Form 8854 and the final income tax returns reflecting dual-status tax years). These issues, as well as possible tax planning, should be discussed with a tax professional before the green card is abandoned.

• Abandoning one’s green card is irrevocable. Unless the individual holds a passport entitling him to the benefits of the US 90-day visa waiver program, the individual will be required to apply for an immigrant visa in order to enter the US in the future.

Americans Overseas

The founders of Americans Overseas, we were born in the Netherlands and received our American citizenship through our (American) mother. When we first heard about this around 2013, we felt disbelief (this can’t be true), anger (why can they just do this), fear (will I get fines or problems now), and panic (what should I do). It is (unfortunately) true that there is a U.S. tax liability. There was no information for us from the local government, the consulate referred us to the IRS, and the IRS was impenetrable.

We therefore started this initiative to help people with good information about the tax system America , prevent unnecessary panic, and offer no obligation and free help if desired and needed we have a network of affordable professionals (accountants), who can help you further with your obligations.

Americans Overseas specializes in helping green card holders navigate complex US tax rules, including expatriation tax issues and worldwide income taxation. Our network of US tax accountants and financial planners offers affordable, obligation-free assistance tailored to your unique situation.

If you have questions about FATCA, US tax obligations, or relinquishing your green card, contact Americans Overseas for expert advice.

Contact us for more information