{"id":152,"date":"2022-10-25T18:43:57","date_gmt":"2022-10-25T18:43:57","guid":{"rendered":"https:\/\/www.hrblock.com\/expat-tax-preparation\/resource-center\/?p=152"},"modified":"2025-03-13T14:55:14","modified_gmt":"2025-03-13T18:55:14","slug":"thinking-about-renouncing-your-u-s-citizenship-or-green-card-beware-of-the-exit-tax","status":"publish","type":"post","link":"https:\/\/www.hrblock.com\/expat-tax-preparation\/resource-center\/filing\/status\/thinking-about-renouncing-your-u-s-citizenship-or-green-card-beware-of-the-exit-tax\/","title":{"rendered":"Thinking about renouncing your U.S. citizenship or Green Card? Beware of the exit tax."},"content":{"rendered":"\n<p>The number of Americans wanting to renounce their U.S. citizenship or Green Card is on the rise, and if you\u2019re one who\u2019s planning your exit strategy there\u2019s a big factor you should consider before making any moves: the U.S. exit tax.<\/p>\n\n\n\n<p>Giving up your Green Card or relinquishing your U.S. passport isn\u2019t a decision to be made lightly, so we\u2019ve outlined a few of the most important things you should understand about taxes before sealing the deal on expatriation.<\/p>\n\n\n\n<p><em>Need help filing&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/resource-center\/forms\/form-8854-initial-and-annual-expatriation-statement\/\">Form 8854<\/a>&nbsp;to expatriate from the U.S.? We can help.&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/expat-tax-preparation-and-services\/\">Get started<\/a>&nbsp;with H&amp;R Block\u2019s Expat Tax Services today and get the peace of mind your exit taxes are all buttoned up.<\/em><\/p>\n\n\n\n<div class=\"wp-block-create-block-hrb-expat-ways-to-file\" class=\"wp-block-create-block-hrb-expat-ways-to-file\"><div class=\"wtf-column wtf-column--left\"><a href=\"https:\/\/expatonline.hrblock.com\/wizard\/introduction\/2021?sat_track=true\" target=\"_blank\" rel=\"noopener\" data-track=\"{'loc':'b', 'nm':'start file yourself'}\">File on my own<\/a><\/div><div class=\"wtf-column wtf-column--right\"><a href=\"https:\/\/expat.hrblock.com\/s\/login\/SelfRegister?sat_track=true\" target=\"_blank\" rel=\"noopener\" data-track=\"{'loc':'b', 'nm':'start file with an advisor'}\">File with an advisor<\/a><\/div><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-u-s-exit-tax\">What is the U.S. exit tax?<\/h2>\n\n\n\n<p>When you renounce your U.S. citizenship or decide to give up your Green Card, you need to tie up loose ends with the IRS by ensuring you\u2019re all paid up on your U.S. taxes. For some, that means being charged an exit tax on your income in your last year of citizenship or residency. Why? Because some of your assets \u2014 like capital gains on home ownership or funds in retirement accounts \u2014 haven\u2019t been taxed yet.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-who-has-to-pay-the-u-s-exit-tax\">Who has to pay the U.S. exit tax?<\/h2>\n\n\n\n<p>Not everybody who leaves the country has to pay an exit tax \u2014 only those citizens and long-term resident Green Card holders who the IRS says fall in the category of&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/resource-center\/filing\/covered-vs-non-covered-expatriates\/\">covered expatriates<\/a>. To be considered a covered expatriate, you must meet one of the below standards:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>You have a personal net worth of over $2 million at the date of expatriation. This is per person, so, theoretically, both you and your spouse could each be worth $1.9 million and still avoid the exit tax<\/li>\n\n\n\n<li>Your average net income tax liability from the past five years is over a set amount ($201,000 for 2024). The expatriate\u2019s average annual net income tax for the period of 5 tax years ending on the date before relinquishing citizenship or residency is greater than $201,000 for those expatriating in 2024 (up from $190,000 for 2023 and $178,000 for 2022).<\/li>\n\n\n\n<li>You fail to indicate on Form 8854 that you\u2019ve filed a tax return for each of the past five years<\/li>\n<\/ol>\n\n\n\n<p>It\u2019s a little different for Green Card Holders \u2014 if you\u2019re considered a long-term resident (or Green Card holder for 8 of the past 15 years) you could be subject to the exit tax. But, if you are a Green Card holder and have only had it for two years, you may not be considered a long-term resident and then wouldn\u2019t have to worry about the exit tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-s-included-in-the-exit-tax-net-worth-calculation\">What&#8217;s included in the exit tax net worth calculation?<\/h2>\n\n\n\n<p>Not sure if your net worth is over $2 million? To&nbsp;<a href=\"https:\/\/www.hrblock.com\/tax-center\/lifestyle\/financial-education\/how-to-calculate-net-worth\/\">calculate net worth<\/a>, the IRS calculates the value of all your assets (including capital gains on stocks and property values, gains in U.S. retirement accounts, and funds in&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/resource-center\/income\/i-have-a-foreign-pension-plan-what-should-i-know-come-tax-season\/\">foreign pensions<\/a>) and treats them as if you\u2019d sold them on the day of expatriation.<\/p>\n\n\n\n<p>Calculating the exit tax is tricky in general, but if you\u2019ve got retirement accounts and foreign pensions it jumps to a whole new level of complexity. The IRS considers the present net value, the type of pension or retirement account, estimated accrued benefit of future distributions, where the pension is held and where the work was done, and that\u2019s just scratching the surface.<\/p>\n\n\n\n<p><strong>We don\u2019t recommend trying to calculate your exit tax amount on your own \u2014 this is one scenario where getting it wrong can have harsh consequences, so it can be helpful to&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/expat-assisted-tax-filing\/\">have an expert handle the paperwork<\/a>.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-else-should-i-know-about-the-exit-tax-before-filing-for-expatriation\">What else should I know about the exit tax before filing for expatriation?<\/h2>\n\n\n\n<p>First, understand that expatriation is not your only option. If you\u2019re stressed about your U.S. tax situation, talk with an advisor and see if they can help lower your tax burden.<\/p>\n\n\n\n<p>Second, if you know any of your past tax filings have been incorrect, you need to get them amended before beginning the expatriation process. When you file Form 8854, you\u2019ll need to check a box that verifies your last five years of taxes have been filed and are correct. If you check this box but have mistakes on past returns, you can get yourself into legal troubles.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-can-i-avoid-the-exit-tax-when-renouncing-my-green-card-or-u-s-citizenship\">Can I avoid the exit tax when renouncing my Green Card or U.S. citizenship?<\/h2>\n\n\n\n<p>There are ways you can minimize the amount of tax you owe during expatriation \u2014 such as minimizing your taxable income or minimizing capital gains through spousal distribution \u2014 but you won\u2019t be able to get around having to pay taxes completely. The penalties for tax evasion are steep and trust us\u2014it\u2019s not worth it.<\/p>\n\n\n\n<p>If you\u2019re hesitant to renounce citizenship but see your U.S. tax obligation as a burden while living overseas, you do have another option \u2014 simplify your tax situation. You should discuss these with your tax and financial advisor first, but here are a few ways you can make your U.S. taxes easier:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Consolidate your foreign accounts. If you have more than one foreign account, you\u2019re increasing your foreign account reporting obligations and, as a result, the cost of your U.S. tax return.<\/li>\n\n\n\n<li>Avoid&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/resource-center\/income\/pfics-foreign-mutual-fund-reporting-requirements-for-u-s-expats\/\">foreign mutual funds<\/a>. The U.S. taxes these accounts (known as PFICs) pretty heavily, putting a damper on your future financial goals.<\/li>\n\n\n\n<li>If you\u2019re a business owner or contractor, make sure you keep U.S. taxes in mind when scheduling business activities.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-worrying-about-your-u-s-taxes-relax-expat-tax-help-from-h-amp-r-block-is-only-a-few-clicks-away\">Worrying about your U.S. taxes? Relax. Expat tax help from H&amp;R Block is only a few clicks away<\/h2>\n\n\n\n<p>We get it \u2014 taxes are complicated enough without throwing another country into the mix. That\u2019s why no matter where in the world you are, we\u2019ve got a tax solution for you\u2014whether you want to&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/diy-expat-tax-filing-online\/\">DIY your expat taxes<\/a>&nbsp;or&nbsp;<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/expat-assisted-tax-filing\/\">file with help from an advisor<\/a>. Thousands of U.S. expats have benefited from the expertise here at H&amp;R Block\u2019s Expat Tax Services\u2014join them and get started with<a href=\"https:\/\/www.hrblock.com\/expat-tax-preparation\/expat-tax-preparation-and-services\/\">&nbsp;Virtual Expat Tax Preparation<\/a>&nbsp;from Block today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn about the cost of renouncing your U.S. citizenship from the tax experts at H&#038;R Block. Exit taxes will vary based on net worth and tax liability.<\/p>\n","protected":false},"author":3,"featured_media":153,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[42],"tags":[],"class_list":["post-152","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-status"],"acf":[],"yoast_head":"<title>Thinking about renouncing your U.S. citizenship or Green Card? 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