Will I need to pay an Exit Tax if I renounce my US Citizenship or my Green Card?
You may have heard that the U.S. charges an Exit Tax to certain U.S. citizens and long-term residents who decide to relinquish their citizenship or permanent residency status.
The IRS details everything you need to know here.
When does the tax apply?
According to the IRS, the tax applies to people who are “covered expatriates”.
You are classified as a “covered expatriate” if you meet any of the following criteria:
- Your net worth is $2 million or more on the date of expatriation.
- You had an average annual U.S. income tax liability of more than $190,000 (as of 2023) over the last five years before expatriation.
- You fail to certify that you have complied with all U.S. federal tax obligations for the five years preceding expatriation.
The exit tax is essentially a tax on the unrealized gains of your worldwide assets as if you had sold them the day before you expatriate.
If you are a covered expatriate, you may owe tax on the “deemed sale” of your assets, though there is an exclusion (approx. $821,000 as of 2023) that can reduce the taxable amount.
What should I do?
If you are considering renouncing U.S. citizenship or giving up a green card, you should consult with a tax professional or lawyer who can give you advice. They can help you assess whether you will be subject to the exit tax and how much you may owe.
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