I am thinking about giving up my U.S. citizenship or green card. Will I need to pay an exit tax if I do so?
It depends. The U.S. has expatriation rules that may charge an exit tax on your income, including deferred income like a 401(k), in your last year of citizenship or residency. Whether you will be subject to this tax depends on your overall tax liability from the past several years, plus your net worth when you renounce your U.S. citizenship or your green card.
You may also be subject to future taxes on your U.S. sourced income, although treaty benefits may limit the amount. However, you shouldn’t be subject to expatriation tax rates on foreign income for the years after you renounce your U.S. citizenship or green card.
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