US President Biden’s tax increase is strong motivation to renounce US citizenship

3 min
Published on: 03-05-2021 Last modified on: 12-02-2024

According to The Standard: US President Biden’s tax increases are expected to offer an incentive for United States expats to give up their citizenship.

Renouncing US citizenship

Increasing taxes and citizens-based taxation are strong motivations to renounce, says Daan Durlacher, founder at Americans Overseas, a Netherlands-based company specializing in US tax preparation for US citizens abroad.

“As most of our clients are Americans living and working and therefore paying tax overseas, and in a lot of cases pay double tax – resident taxation and the US citizens taxation – more and more dual nationals are renouncing,” Durlacher says

The higher the tax rate, the more the benefit of expatriating.

Exit tax

The US imposes an “exit tax” on a US expatriate who has a net worth of more than US$2 million, or an average annual net income tax of more than US$172,000 over the past five years or fails to comply with federal tax obligations over the past five years.

Meanwhile, a US recipient of gifts or bequests from expatriates who were subject to the exit tax is required to pay a tax on those assets at a 40 percent rate.

The number of Americans who gave up their citizenship more than tripled to about 6,700 in 2020 from a year before.

US tax increase 2021

The US taxes its citizens on their worldwide income no matter where they reside, including capital gains on foreign investment properties.

Biden is reportedly seeking to nearly double the tax rate on capital gains to 39.6 percent for people earning more than US$1 million.

That rate would be added to the 3.8 percent net investment tax which helps fund the Affordable Care Act, known as Obamacare, bringing the top capital gains rate to 43.4 percent.

“Almost everything you own and use for personal or investment purposes is a capital asset. Examples include a home, personal-use items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss,” according to the website of the IRS.

Need more information on the US tax increase 2021?

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 tax obligations.


Contact us for more information


Source: The Standard

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Frequently asked questions

Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.

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