Note: renouncing U.S. citizenship is a complex process with significant tax implications. It is often advisable to consult a tax professional to ensure all obligations are met and to evaluate strategies for reducing potential tax liabilities. The exit tax, in particular, can lead to significant liabilities, especially for those with high net worth or valuable assets. If you are considering renouncing U.S. citizenship, TFX tax experts can assist you with planning and expatriation. For pricing, please refer to the Expatriation services article.
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How to renounce U.S. citizenship and officially terminate your U.S. tax residency as a U.S. citizen
To renounce U.S. citizenship, an individual must follow these steps:
Schedule an appointment at a U.S. embassy or consulate abroad.
Complete the required Forms:
Form DS-4079: Request for Determination of Possible Loss of U.S. Citizenship.
Form DS-4080: Oath of Renunciation of the Nationality of the United States.
Form DS-4081: Statement of Understanding Concerning the Consequences and Ramifications of Renunciation of U.S. Citizenship.
Form DS-4082: Witnesses' Attestation Renunciation/Relinquishment of Citizenship.
Pay a $2,350 (subject to change) renunciation fee when you attend your renunciation appointment at the U.S. embassy or consulate. This fee is charged by the U.S. Department of State for processing the renunciation of U.S. citizenship. It is required regardless of whether you are a covered or non-covered expatriate.
Take an oath of renunciation in front of a consular officer during the consulate appointment.
Receive a Certificate of Loss of Nationality (CLN), which serves as proof of renunciation, after the Department of State processes the application.
Tax filings after relinquishing U.S. citizenship
After renouncing, U.S. tax obligations don’t automatically end. An individual must complete these tax-related steps:
File a final tax return for the year of renunciation: The IRS requires you to file a dual-status tax return for the part of the year you were still a U.S. resident and for the other part of the year you were a non-resident. This return includes all income earned up until the renunciation date.
File Form 8854 (Initial and Annual Expatriation Statement) to:
Certify tax compliance with U.S. tax obligations the five years prior to expatriation and avoid penalties.
Declare the net worth of your assets and liabilities.
Determine if you are a “covered expatriate".
Report any exit tax owed (only for covered expatriates).
Covered expatriate status
After filing, the IRS may classify you as a “covered expatriate" if any of the following statements apply:
Your average annual net income tax liability for the 5 tax years ending before the date of expatriation is more than a specific threshold (adjusted annually for inflation; $165,000 for 2018, $168,000 for 2019, $171,000 for 2020, $172,000 for 2021, $178,000 for 2022, and $190,000 for 2023).
Your net worth was $2 million or more on the date of your expatriation.
You fail to certify on Form 8854 that you have complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation.
❗ Important note: failure to file Form 8854 may result in the IRS automatically considering you a covered expatriate.
Exit tax (only for covered expatriates)
If you are classified as a covered expatriate, you may owe an exit tax — a tax on the unrealized gains of your worldwide assets as if they were sold the day before expatriation. Any gain from this “deemed sale” is subject to U.S. tax. This may apply to:
Investments: Stocks, bonds, and securities.
Real estate: Property owned domestically or internationally.
Other assets: Pensions, collectibles, and other personal property.
Additionally, be aware of potential implications for estate and gift taxes. U.S. estate and gift tax rules may apply to future transfers of property to U.S. persons, which could impact your estate planning.
How to file a dual-status tax return after relinquishing U.S. citizenship
If you are up to date with U.S. income tax and financial reporting, in the year of expatriation, you must file two returns — regular Form 1040 and 1040NR, and Form 8854.
To do it, follow these steps:
Create a resident TQ for the year you expatriate and select US Citizen.
Complete your first TQ and enter your income information up until the date of expatriation.
Create a non-resident (NRA) TQ for 2005, select Not a US Citizen or GC Holder, and enter "365" days spent each year in the United States.
Complete your second TQ and enter your US-sourced income information from the date of expatriation till the end of the year you expatriated.
Notes:
2005 is a random year because our system only allows one TQ per year per person.
As opposed to the resident TQ, the non-resident TQ will only require U.S.-sourced income, not worldwide income.
Next, download Form 8854, and fill out parts I, II, and III, if applicable. You should not leave blanks, enter information, or write N/A or "?".
Upload a completed Form 8854 to the Documents section.
Submit your questionnaires for a tax preparer review. We will check 8854 for completeness and accuracy.
❗ Important note: we assist with 8854 only in conjunction with the tax return (not standalone).