As a US citizen you have many tax obligations, such as reporting all foreign income and filing a federal tax return. We are regularly contacted by US expatriates based across the globe that are considering renouncing their citizenship. When you renounce your citizenship you are no longer expected to declare your worldwide income to the IRS. However, there are a number of reasons why renouncing your citizenship is not always the best decision as a US expatriate.
The Tax Bill Before You Renounce
Under Section 877A of the Internal Revenue Code, a stringent exit tax is applicable to many expatriates before citizenship can be renounced. Expatriates who will fall into the clasp of the exit tax includes individual who meet any portion of the three-part test after June 17, 2018. Below is what the three-part test includes
Tax Liability Test
The fee of renouncing as a US Expat
While filing a tax return can be costly, renouncing your citizenship as a US expatriate can often be even more so. The US government currently charges a fee of $2,350 to relinquish US citizenship. Other tax considerations may also be applied to this charge.