Covered & Non-Covered Expatriate
An expatriate is someone who has given up their U.S. citizenship or green card through official U.S. government procedures. In most situations, expatriates must file Form 8854 with their final U.S. tax return. A covered expatriate is an expatriate who meets one of the three requirements below and must therefore pay an exit tax on all their assets in their final year*.
- The expatriate’s average annual net income tax for the period of 5 tax years ending on the date before relinquishing citizenship or residency is greater than $171,000 for those expatriating in 2020 (up from $168,000 for 2019)
- The taxpayer’s net worth is at least $2 million on the date of expatriation
- The taxpayer fails to certify that he or she has met the requirements of U.S. tax law for the 5 preceding tax years or fails to submit evidence of his compliance that the IRS requires (Form 8854 is used for such certification)
You are not liable to pay the exit tax if you do not meet any of the three requirements above.
* The requirements above apply primarily to individuals expatriating after 2008.