Expatriation Tax Services

For personal or financial reasons, an individual may decide to renounce their US citizenship. Under certain circumstances, the US may then impose an expatriate tax or “US Exit Tax” at the time of expatriation. 

The US exit tax is imposed if any of these three reasons apply:

• The individual’s net worth is in excess of $2 million (value of all assets including house, pensions, deferred compensation, etc.), 
• The taxpayer has not complied with his or her US tax obligations (reporting and paying) for the last five years, 
• The individual’s average tax liability for the last five years exceeds $178,000 (adjusted for inflation). 

If the expatriate was a dual citizen at birth, the $2 million trigger does not apply, provided the individual became at birth a citizen of the United States and a citizen of another country and continues to be a citizen of such other country, and the individual has had no substantial contacts with the United States.

The US exit tax also applies to Green Card holders who have held their Green Card during eight of the last 15 years preceding expatriation (referred to as Long-Term Residents). Green Card holders remain liable for US taxes until they formally give up their Green Card or it is determined to be administratively or judicially abandoned. The fact that the Green Card may no longer support US residence is not determinative. In other words, simply putting the card in a drawer and forgetting about it won’t exclude the person from paying US taxes. It is possible for a Green Card holder who left the United States years ago to still be subject not only to US income tax but to the exit tax if they decide to formally revoke the Green Card.

Our Advisory Services

There are planning opportunities that may help reduce the taxpayer’s obligations if their net worth is greater than the $2 million trigger. We have handled many cases of expatriation, so please get in touch if you have any questions. If expatriation is not currently your desired route, let us help you with your overall tax planning as it is never too late or too early to update income tax and estate plans.

Our Compliance Services

We can help you calculate exit tax. The US exit tax is based on the assumption that the expatriate sells all of their assets and receives all of their deferred compensation (including all pension plans) immediately before the expatriation date. The gain on the sale of the assets is reduced by $767,000 (in 2023—adjusted annually). This exclusion only applies to the gain realized on the sale of the individual’s assets. There is no reduction for the pension and deferred compensation amounts subject to the tax.

A Form 8854 must be submitted to establish the fact that the taxpayer has expatriated.

• The form also confirms tax compliance for the five years prior to expatriation and lists the assets and the value of such assets the taxpayer-owned immediately prior to expatriation. This amount determines whether an exit tax is owed.
• The form is filed with your income tax return for the year in which you expatriate. For example, if expatriation occurred in July 2024, the 2024 income tax return (including Form 8854) would be due on the 15th of April 2025 (or date of an extension). A separate copy of the form must be sent to the Internal Revenue Service in Austin Texas.
• Failure to file Form 8854 may result in a penalty of $10,000. We can help ensure fines are avoided. 

In some instances, additional forms will be required.  For example, if you are a non-resident alien engaged in a trade or business in the United States, you are required to submit a form 1040NR (Non-Resident) tax return and will be charged a flat 30% tax on all income.

For those who have not met their US tax obligations for the last five years, we can help bring you into compliance. Read more about voluntary disclosure options here.

We can help you efficiently navigate your decision to expatriate.

For those who are considering renouncing their US citizenship or formally giving up their Green Card, our knowledgeable and experienced tax professionals can help you decide on the most suitable strategy, calculate exit tax, avoid potential penalties for non-compliance, advise on the forms that need to be completed and ensure a smooth and efficient exit experience.  Contact us to discuss how we can support you.