Would you owe the exit tax?
Giving up U.S. citizenship, or a green card held in 8 of the last 15 years, makes you a covered expatriate if any one of three tests applies. Answer a few questions to see where you stand. Nothing you type leaves your browser.
Good to know
1Who do the exit tax rules apply to?
Two groups: U.S. citizens who renounce or otherwise give up citizenship, and long-term residents who give up a green card they held in at least 8 of the last 15 tax years. Any part of a year counts as a year, so a green card held from December 2018 to January 2025, just over six years, counts as eight.
Everyone in those groups files Form 8854. It shows whether you're a covered expatriate, and only covered expatriates face the exit tax. Many people who renounce aren't covered, and many who are owe little or nothing.
Green card holders with fewer than 8 years aren't expatriates for tax at all. They file a final dual-status return for the year the card ends, and the exit tax rules don't apply.
2What are the three covered expatriate tests?
You're a covered expatriate if any one of these applies on the day you expatriate:
| Test | You're covered if |
|---|---|
| Net worth | Your worldwide net worth is $2 million or more. The figure isn't adjusted for inflation. |
| Average tax | Your average yearly 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. |
Net worth counts everything you own anywhere, at market value, less what you owe: homes, pensions, investments, business interests and interests in some trusts. Average tax is the income tax you actually owed after credits, not your income, so the exclusion and the foreign tax credit keep most people abroad far below it. Compliance means every return and form for the five years, FBARs included, filed and paid.
The compliance test catches the most people, and it's the one you can fix.
3Who is exempt from the tests?
Two groups of former citizens escape the net worth and average tax tests, though never 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.
These exceptions don't apply to green card holders. And because the compliance test still applies, a dual citizen from birth who hasn't been filing is covered unless they catch up first.
4What happens if you're covered?
A covered expatriate is taxed as if they sold everything they own, worldwide, at 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). Cash, and assets that haven't grown much, add little.
Retirement accounts, pensions and other deferred pay follow their own rules: some are treated as paid out in full the day before, and some are taxed as payments arrive. 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. Planning before the date is what makes the difference.
5When is Form 8854 filed?
With your final tax return, a dual-status return for the year you expatriate, by that return's due date, including extensions. You file it whether or not you're covered: it's where you certify the five years of compliance. Not filing it can bring a $10,000 penalty, and without it you haven't certified, which on its own makes you covered.
The renunciation itself takes place at a U.S. embassy or consulate, and the State Department confirms the loss of citizenship later. The tax side is separate, and it's worth settling before the appointment: catching up first, usually through the Streamlined Foreign Offshore Procedures, lets you certify. Already renounced and never filed? The relief procedures for former citizens may forgive the past tax.
Common questions
Do I owe exit tax just for renouncing?
No. Only covered expatriates face it, and only on net gains above the exclusion, plus the special rules for retirement accounts and deferred pay.
Is the $2 million net worth test adjusted for inflation?
No. It has stayed at $2 million, while the average tax test and the exclusion go up each year.
Can I fix the compliance test before I renounce?
Yes. Catching up first, usually through the Streamlined procedures, lets you certify the five years on Form 8854.
Does giving up a green card count?
Only if you held it in at least 8 of the last 15 tax years. Then you file Form 8854, and the same three tests apply, without the exceptions for dual citizens and minors.
Do I still file U.S. returns after renouncing?
Not as a citizen. After the final dual-status return, you file only if you have U.S. income that a nonresident would report, or as a covered expatriate with deferred items, which have their own yearly Form 8854.
Thinking of renouncing? Get the tax side right first.
We'll check the three tests with you before you book anything, and catch up any missing years for one flat fee agreed upfront.
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