Renouncing US Citizenship
In recent years, more US citizens have been giving up their citizenship, especially those known as “Accidental Americans.” These are people who either were born in the US but left when they were young or were born abroad to US parents and became citizens without ever living in the US.
Some people choose to renounce their citizenship because they don’t plan to return to the US and want to avoid the ongoing burden of US taxes.
Renouncing US citizenship involves two main steps:
- Official Renunciation: You must formally renounce your citizenship through the US State Department by scheduling an interview at a US consulate or embassy.
- Tax Compliance: You need to handle your tax obligations with the IRS. The US government has rules in place to ensure that citizens don’t simply walk away from their tax responsibilities. This includes the potential “Exit Tax.”
What is the process for renouncing US citizenship?
- Attend the Meeting: At the appointment, you’ll sign an oath of renunciation before a consular officer.
- Make an Appointment: Contact the US embassy or consulate to schedule a meeting.
- Complete Necessary Forms: Fill out Form DS-4079 and possibly other forms, depending on your situation.
- Pay the Fee: The current renunciation fee is US$2,350.
WHY ARE SO MANY GIVING UP THEIR U.S. CITIZENSHIP?
DOUBLE TAXATION
Double taxation affects US citizens living abroad because they are taxed by both the US and their country of residence on the same income. Although tax treaties can reduce this burden, they don’t eliminate it entirely—especially in cases like selling property, which can result in significant US capital gains taxes.
EXPENSIVE FEES
The administrative fee to renounce US citizenship has surged from US$400 to US$2,350, and it may continue to rise.
This increase reflects the growing number of US citizens seeking to renounce their citizenship, possibly due to the financial burdens and complexities associated with maintaining their connections with the US.
FINANCIAL FREEDOM
US citizens living abroad face restrictions and high compliance costs when trying to invest in foreign markets. These hurdles, along with additional taxes, make it difficult to manage finances and plan for the future, leading many to consider renouncing their citizenship for greater financial freedom.
ACCIDENTAL AMERICAN
Accidental Americans are individuals who hold US citizenship without any meaningful ties to the country—often because they were born there or have a US. parent.
Despite their limited connection, they face the same tax obligations as any other US citizen, which can be burdensome enough to drive them to renounce their citizenship.
What tax consequences should you expect when renouncing US citizenship?
Renouncing US citizenship triggers significant tax implications—especially if you’re classified as a “covered expatriate.”
If your net worth exceeds US$2 million, or your average annual tax liability over the past five years surpasses US$190,000, you may face an exit tax.
What is a Covered Expatriate and Exit Tax?
A covered expatriate is a US citizen or long-term resident who meets certain criteria when renouncing their citizenship, such as a net worth of $2 million or more, or an average annual income tax liability exceeding US$190,000 over the past five years.
If you qualify as a covered expatriate, you may be subject to an exit tax, which treats your worldwide assets as if they were sold at their fair market value on the day before you renounce your citizenship, leading to potential tax liabilities.
What is the cost involved in renouncing US citizenship?
Renouncing US citizenship comes with a fee of US$2,350, covering the administrative costs set by the US Department of State.
Beyond this, there might be additional costs, such as paying for a tax professional to handle the exit tax and to ensure all your tax obligations are met.
How does relinquishing US citizenship differ from renouncing it?
Renouncing US citizenship is a formal process involving an oath at a US consulate, officially ending your citizenship.
Relinquishing, however, can occur when you perform an expatriating act (like becoming a citizen of another country) with the intent to give up US citizenship. /
Both actions result in the loss of citizenship, but renouncing is a more formal and deliberate process compared to relinquishing.
Will I still receive my Social Security benefits after renouncing?
Even after renouncing your US citizenship, you can still receive Social Security benefits if you qualify.
However, the ability to receive these benefits depends on the country you move to after renunciation. The US has agreements with certain countries that allow continued payments, but in others, benefits might be reduced or suspended.
This is why it’s important to check the specific rules that apply to your new country of residence to ensure you can continue receiving your benefits.
Both actions result in the loss of citizenship, but renouncing is a more formal and deliberate process compared to relinquishing.
How I renounced my U.S. citizenship
What’s the process like when you renounce your U.S. citizenship?
Hear it from Stephen a bonafide American who gave up his citizenship.
“The main pros were these financial freedom…”
Read more about Stephen’s story here>>
How does renouncing citizenship affect my final tax return?
When you renounce your US citizenship, you must file a final tax return covering the portion of the year up to your renunciation date.
This return, known as the “dual-status return,” includes income earned as a US citizen and may trigger an exit tax if your income or net worth exceeds certain thresholds.
The exit tax applies to individuals considered “covered expatriates” under US tax law. Filing this final return ensures you meet all tax obligations associated with your US citizenship.
Does renouncing my US citizenship end my tax obligations?
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.
All previous tax responsibilities must be settled before the IRS considers your renunciation complete.
Renunciation Packages
Standard Renunciation Program
If you don’t qualify for the Relief Procedure for Certain Citizens, then use this program.
1. You must have citizenship of another country.
2. You’ll need a Social Security Number, if you don’t have one, we can help.
3. Tell us if your net worth is above US$2m
Relief Procedures For Certain Citizens
If you meet all the criteria, you can use this program…
1. You’re a U.S. citizenship holder that has never filed a U.S. tax return, except a 1040NR.
2. You have U.S. citizenship but not necessarily a Social Security Number.
3. You have U.S. citizenship and your net worth is below US$2m
What if I’m way behind my U.S. tax returns?
There is a special IRS program to help you catch up on your U.S. taxes safely, without fines and penalties.
STREAMLINED AMNESTY
It’s for American citizens that didn’t know they had to file U.S. tax returns each year, and have therefore fallen behind. Some more than 30 years!
How does renouncing US citizenship impact my life abroad?
Giving up US citizenship can change your tax situation and affect your ability to travel, access certain US services, and even claim US Social Security benefits.
This is why you will need to ensure that your new country recognizes your status.
What is the IRS relief procedure for accidental Americans?
The IRS offers a relief procedure to help “Accidental Americans” who didn’t realize they had US tax obligations.
This procedure allows eligible individuals to resolve their tax issues and renounce citizenship without facing penalties. It involves filing tax returns for the past five years and certifying that any non-compliance was unintentional.
“You don’t need a lawyer, just fill in the forms and there shouldn’t be a problem…”
Hear it from Jenny, a bonafide American who gave up her citizenship.
Read more about Jenny’s story here>>
Why work with Expat Tax Online?
EXPERIENCE MATTERS
We’ve already taken over 500 people successfully through the Renunciation program. Do it once. Do it right.
WE’RE LICENSED
At least 35 members of our tax team are licensed by the IRS. That’s easy to verify on the official IRS website.
CLIENT MANAGER
You’ll have a dedicated team member by your side throughout the process. Our tax questionnaire is easy to use.
PRICE LEADER
We’re proud to be the industry price leader. We include hundreds of extra IRS forms without additional fees. Expect a fixed price from the outset. No surprises.
