Form 8854 and the exit tax: who is a covered expatriate

1Who files Form 8854

• U.S. citizens who renounce or otherwise give up citizenship.
• Long-term residents who give up a green card held in at least 8 of the last 15 years. Any part of a year counts as a year. See green card holders abroad.

Form 8854 goes in with your final, dual-status return for the year you expatriate, by that return's due date, including extensions.

2The three tests

You're a covered expatriate if any one of these applies on the day you expatriate:

• Net worth: $2 million or more, worldwide.
• Average tax: average annual U.S. income tax over the five years before is more than $211,000 for 2026 ($206,000 for 2025).
• Compliance: you don't certify on Form 8854 that you met all your U.S. tax obligations for those five years.

Our exit tax check runs through all three in a minute.

The compliance test catches the most people, and it's the one you can fix.

3The exceptions

Two groups of former citizens escape the net worth and average tax tests, though not the compliance test:

• Dual citizens from birth who are still citizens and tax residents of the other country, and were U.S. residents for no more than 10 of the last 15 years.
• People who renounce before age 18½, after no more than 10 years as U.S. residents.

4How the exit tax works

A covered expatriate is taxed as if they sold everything they own, worldwide, at its market value on the day before expatriating. Only the net gain counts, and the first $910,000 of it is excluded for 2026 ($890,000 for 2025).

• Retirement accounts, deferred pay and some trusts follow their own rules. An IRA, for example, is treated as paid out in full the day before.
• Gifts and inheritances a covered expatriate later gives to U.S. persons can be taxed at the top gift and estate tax rate, paid by whoever receives them.

Many covered expatriates owe little or nothing, especially when most of their wealth is in cash or assets that haven't grown much. Planning before the date is what makes the difference.

5Penalties and late filing

Not filing Form 8854 can bring a $10,000 penalty, and without it you haven't certified compliance, which on its own makes you a covered expatriate. Renounced years ago and never filed? The relief procedures for former citizens may forgive the past tax, if you meet their limits. Still a citizen and behind? You'd catch up first, usually under the Streamlined Foreign Offshore Procedures. See every IRS catch-up option for expats.

Common questions

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