Under Sec. 877A, a U.S. exit tax may apply to individuals who relinquish their U.S. citizenship or are long-term residents who cease to be a U.S. permanent resident. The tax is designed to make sure that all unpaid taxes are settled before a U.S. citizen or resident withdraws from the U.S. tax system.
Double taxation occurs when income or assets are taxed by more than one jurisdiction. US expats are often subject to taxation both in the US and their country of residence. The IRS provides several mechanisms, such as tax credits and exclusions, to help prevent double taxation for Americans living abroad.
A flat tax of 30% on investment income may apply. Being a covered expat could also impact your ability to give gifts to US citizens — even years after you've renounced your US citizenship.
Do I still need to file a U.S. tax return? Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.
In addition to income taxes, self-employed expats must also pay the self-employment tax while living abroad. This 15.3% tax replaces the Social Security and Medicare taxes in an employer-employee relationship, and the FEIE or the Foreign Tax Credit doesn't offset it.
The process involves legal procedures, including an interview at a US Embassy or Consulate and payment of a fee $2,350. Being tax compliant for 5 year is a prerequisite for renouncing citizenship. An exit tax may apply to those renouncing their citizenship, depending on their net worth and tax status.
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.
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.
Renouncing U.S. citizenship means forfeiting rights like voting, government protection abroad, and citizenship for children born overseas. The renunciation process is lengthy and extensive, involving paperwork, interviews, and fees, and it is typically irreversible.
Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.
However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023). In addition, you can exclude or deduct certain foreign housing amounts.
The Foreign Earned Income Exclusion, or FEIE, is also known as Form 2555 by the IRS. This expat benefit allows you to avoid double taxation by excluding up to a certain amount of foreign earned income from your US taxes. In 2025, for the 2024 tax year, you can exclude up to $126,500 of foreign earned income.
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.
The US Exit Tax, or Expatriation Tax, is levied on individuals renouncing their US citizenship or green card. Governed by IRC Section 877A, this tax is specifically designed for high-net-worth individuals. It ensures that their worldwide income and assets are taxed prior to exiting the US tax system.
Explaining the Dual Citizen Exception
In order to meet the requirements, Taxpayers must have been born a US citizen as well as a citizen of another country – and continue to be a tax resident of that other country (as of the date of expatriation).
An expatriate or expat is a person who moves to another country long-term to live and work or to retire. Many American expats are retirees or have relocated for a job. Increasingly, they are mobile workers who can work from anywhere using the Internet.
Gus is never found, and parents Margaret (Nicole Kidman) and Clarke (Brian Tee) decide it's time to leave Hong Kong and return to the States with their eldest children to regain a sense of normalcy.
To satisfy the 183-day requirement, count: All of the days you were present in the current year, One-third of the days you were present in the first year before the current year, and. One-sixth of the days you were present in the second year before the current year.
If you are a US citizen, you can stay out of the United States for as long as you want, and you will always have the right to re-enter the country.
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.
Key Takeaways. Most expats are able to receive US Social Security payments while living abroad (if otherwise eligible). Social Security payments are considered taxable income and must be reported on a US income tax return. Totalization Agreements can help expats avoid double taxation and reduce their US tax burden.
Canada. Canada continues to be a top destination for Americans looking to move abroad, thanks to its proximity to the U.S., high quality of life and welcoming immigration policies. The country is known for its universal healthcare system, diverse cities and natural landscapes.
No, renouncing your US citizenship doesn't immediately cancel your tax obligations. You are still required to file a final tax return covering income up to the date of renunciation, and depending on your financial status, you may also owe an exit tax.
An expatriation tax is a government fee charged to individuals who renounce their citizenship, usually based on the value of a taxpayer's property.