Renouncing your US citizenship & Tax Advisory Partnership

Understanding the US Citizenship Renunciation Tax

If you are considering US citizenship renunciation tax planning in 2025, or you are a long-term Green Card holder ending your residency, it’s vital to understand the covered expatriate rules under the IRS regime. These rules determine whether you may be subject to the potentially significant renounce US citizenship tax requirements.

For many expats and so-called “Accidental Americans” renounce citizenship cases can be especially complex. Even if you never lived in the US for long, IRS compliance laws may still apply to you when you attempt to exit the system. Careful preparation is needed before filing Form 8854 to avoid unexpected issues.

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The covered expatriate rules apply if:

Your average annual net income tax liability for the previous 5 years exceeds $201,000 (2025 threshold).
Your net worth is $2 million or more at the time of expatriation.
You fail to certify full IRS compliance for the preceding 5 years.

If any of these apply, you are classified as a “covered expatriate” and subject to the mark-to-market tax regime under IRC 877A, which generally treats your assets as sold on the day before expatriation, potentially creating taxable gains.

Fees and Planning for Renouncing US Citizenship

In addition to exit tax exposure, you should also be aware of the renounce US citizenship fee, which is currently set by the US Department of State. This fee, combined with the potential burden of expatriation tax, can significantly impact your financial planning.

Whether through Green Card relinquishment or US citizenship renunciation, careful consideration is needed to minimize risks for yourself and your family. For most, obtaining professional tax and legal advice ahead of time is essential to avoid penalties and ensure a smooth transition.

If you are preparing to expatriate, we are here to help guide you through compliance, reduce risks, and protect your financial future.

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