How much is the tax on giving up U.S. citizenship?
The current fee to renounce US citizenship is $2,350. A 2024 announcement that the fee would decrease to $450 has yet to be implemented. The capital gain exclusion amount for covered expatriates is now $866,000 for 2024.
Tax Implications of Renouncing US Citizenship
Once you renounce your US citizenship, you will no longer be taxed as a US citizen. Not only could you have to pay an Exit tax, but depending on your situation, you might have to continue filing US tax returns and paying taxes to the US.
The US exit tax is a tax on your worldwide assets. The tax applies to all property that you own on the date of renunciation, including personal items such as cars, boats, and jewelry. There are very few exceptions to this, such as foreign pensions you earned before becoming a US taxpayer.
To renounce U.S. citizenship, you must voluntarily and with the intent to relinquish U.S. citizenship: appear in person before a U.S. consular or diplomatic officer, in a foreign country (normally at a U.S. Embassy or Consulate); sign an oath of renunciation. pay a $2,350.00 fee.
| Taxable income (USD) | Tax rate (%) |
|---|---|
| 0 to 11,600 | 10 |
| 11,601 to 47,150 | 12 |
| 47,151 to 100,525 | 22 |
| 100,526 to 191,950 | 24 |
Loss of U.S. Citizenship Benefits:
You cannot vote in U.S. elections. You cannot have a U.S. passport or benefit from U.S. consular services. You lose the right to work or live in the U.S. without a visa. You lose the U.S. government's protection abroad.
If you are a U.S. citizen or resident living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.
The exit tax is calculated based on the “deemed sale” of an individual's worldwide assets on the day before their expatriation. This means that the expatriate is assumed to have sold all their assets at their fair market value and would be subject to tax on any gains.
Paying taxes is an integral part of being an American resident and citizen. Taxes support local and federal services that you benefit from when you become a U.S. citizen.
If you renounce your U.S. citizenship, you will generally not lose your Social Security benefits. If you have paid into Social Security for at least 40 quarters (10 years), you remain eligible to collect Social Security retirement benefits even after renouncing citizenship.
What countries don't allow dual citizenship?
| Afghanistan | Guana | Libya |
|---|---|---|
| Djibouti | Kiribati | Maldives |
| Eritrea | North Korea | Marshall Islands |
| Estonia | Kuwait | Mauritania |
| Ethiopia | Laos | Micronesia |
Submit $760 if filing by paper, or $710 if filing online.
A common concern is the duration of time a U.S. citizen can spend abroad without jeopardizing their citizenship status. While there is no set limit, extended periods of absence, especially when combined with other factors, can trigger inquiries from U.S. authorities.
On average, U.S. taxpayers paid $13,890 in federal income tax in 2022, based on the most recent available data. Across all Americans, the average income tax rate stood at 14.5%.
| Taxable Income1 | Federal Tax Rates | |
|---|---|---|
| Married Filing Joint | Single Filers | Federal Income |
| $94,301 - $201,050 | $47,151 - $100,525 | 22% |
| $201,051 - $250,000 | $100,526 - $191,950 | 24% |
| - | $191,951 - $200,000 | 32% |
The current fee to renounce US citizenship is $2,350. A 2024 announcement that the fee would decrease to $450 has yet to be implemented. The capital gain exclusion amount for covered expatriates is now $866,000 for 2024.
Avoid Covered Expatriate Status
Find ways to bring your net worth below $2,000,000. Find ways to bring your average income tax liability for the previous five years to a number below the inflation-adjusted threshold that applies to you. And, most of all, fix any noncompliance in tax returns for the five prior years.
| Name | Occupation | Other citizenships |
|---|---|---|
| Yul Brynner | Actor | Switzerland |
| Maria Callas | Musician | Greece |
| Orlan Calayag | Politician | Philippines |
| James Carney | Activist | Honduras |
No, California doesn't have a formal "exit tax," but rather a collection of tax policies affecting high-net-worth individuals who leave the state.
The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you're one of the lucky few to earn enough to fall into the 37% bracket, that doesn't mean that the entirety of your taxable income will be subject to a 37% tax.
What happens if you don t pay taxes as a U.S. citizen living abroad?
Unfortunately, moving overseas doesn't mean you can skip out on tax season. US citizens are required to file a US tax return regardless of where they live. That means that as an American living abroad, you still have to send your taxes to the IRS. Failing to do so could result in steep penalties.
The IRS generally has 10 years – from the date your tax was assessed – to collect the tax and any associated penalties and interest from you. This time period is called the Collection Statute Expiration Date (CSED). Your account can include multiple tax assessments, each with their own CSED.
The exit charge in a nutshell
It is applied when assets leave the trust and is calculated using a formula that is based on the value of the assets at the commencement of the trust and the value of the assets leaving the trust.
But, despite various myths you could find on the different expat boards — just moving outside of the United States and taking up residence in a foreign country does not qualify as formally abandoning their US status or renouncing their US citizenship.
As a practical matter, seeking reinstatement of citizenship through a lawsuit is expensive and procedurally difficult, in part because of the costs of federal litigation, confusing rules regarding the proper court in which to bring such a lawsuit, and a five-year statute of limitations.
