US Taxes, Living Abroad, and Citizenship Renunciation

US Taxes Living Abroad and Citizenship Renunciation

The IRS recently published the official total of 2017 citizenship renunciations, and the numbers are noteworthy. Fourth quarter numbers of those renouncing US citizenship were finalized and showed a drop-off – something a bit different from the past several quarters. Below, we’ve answered some common questions about citizenship renunciation and US taxes living abroad.

Why Do Expats Renounce Their Citizenship?

For one, expat taxes can have a lot to do with decisions to renounce. Filing expat taxes year after year can wear on an expat, particularly because the perceived or actual benefit from the taxes is very low. And the only way to permanently rid yourself of the reporting requirement for US taxes living abroad, if not the payments, is to renounce your citizenship.

For other expats, renouncing can be symbolic of cutting ties with America or of loyalty to their new resident country.

What Are the Consequences of Renouncing US Citizenship?

Renouncing US citizenship is often easier said than done. You will be subject to a renunciation fee of $2,350. Some expats will be required to pay an exit tax the year that they renounce depending on their income tax liability. Also, once your citizenship has been renounced, it cannot be regained, so you will have permanently given up all of the rights that pertain to your US nationality.

What Has Been the Trend in Citizenship Renunciation?

For the past several years, citizenship renunciations have been on the rise. In 2016, the total was a record-breaking 5,410. But the 2017 total marks the first year without an overall increase in quite some time. The 2017 quarterly breakdown is as follows:

Q1: 1,313
Q2: 1,758
Q3: 1,376
Q4: 685

Total Renunciations = 5,132

As you can see, the renunciations fell to less than half of what they were during any other quarters. However, as recent as a decade ago, renouncing US citizenship was a somewhat rare decision. In fact the 4th quarter total of 685 represented more citizenships that were renounced than the total for 2007 and 2008 combined.

Why the 4th Quarter Drop-Off?

The drop-off could be attributed to many things, like the delays at the embassies processing the requests. Future forecasts still predict high renunciation numbers in 2018.

Considering Citizenship Renunciation?

Greenback expat tax experts can help answer your questions about the process. If you decide renunciation is the right decision for you, we can also help you complete the proper forms. Contact us today!

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