If I renounce my US citizenship, am I free from US taxes?

Once you renounce your US citizenship, you will no longer have to pay US taxes. However, the US government does charge a fee of $2,350 to relinquish citizenship. You may also need to pay an exit tax if you qualify as a covered expatriate.

Will I have to pay an exit tax before renouncing my US citizenship?

The Heroes Earnings Assistance and Relief Tax Act of 2008 changed the financial consequences of renouncing US citizenship. This act imposes an exit tax—above and beyond standard US tax rates—on covered expatriates who surrender their US citizenship.

You are considered a covered expatriate and subject to the exit tax if you meet three conditions:

1. Your average annual net income tax for the 5 years prior to the date of expatriation is more than a certain amount (thresholds are adjusted for inflation each year):

• • $160,000 for 2015
  • $161,000 for 2016
  • $162,000 for 2017
  • $165,000 for 2018
  • $168,000 for 2019
  • $171,000 for 2020
  • $172,000 for 2021

2. Your net worth is $2 million or more on the date of your expatriation.

3. You fail to certify on Form 8854 that you are fully compliant with your US tax obligations for the 5 years preceding the date of your expatriation.

If you qualify as a covered expatriate, you will have to pay an exit tax based on the value of your property at the time you expatriate. If you fall into this category, it’s best to consult an expat tax professional to understand your options and requirements.

What’s the fee for renouncing your US citizenship?

If you’re not a covered expatriate, you will not be subject to additional US taxes after you officially renounce your citizenship. However, the US government does charge a one-time fee of $2,350 to relinquish your citizenship.

Giving up your US citizenship can be a complex process! To get personalized advice on your situation, book a consult with a Greenback expat tax professional today.