Note: abandoning a Green Card 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 abandoning your Green Card, TFX tax experts can assist you with planning and expatriation. For pricing, please refer to the Expatriation services article.
Table of contents:
How to abandon a U.S. Green Card and officially terminate your U.S. tax residency as a Green Card holder
Individuals must file Form I-407, Record of Abandonment of Lawful Permanent Resident Status, with U.S. Citizenship and Immigration Services (USCIS), either at a U.S. embassy or consulate abroad or by mailing it directly to the USCIS. Once Form I-407 is accepted, your U.S. tax obligations as a resident alien end on that date.
Tax filings after abandoning a Green Card
The IRS requires you to file a final tax return for the year in which you abandoned your Green Card. You have two options:
File a dual-status return as a dual-status alien, which includes:
Form 1040: Covers the portion of the year you were a U.S. resident, reporting all worldwide income earned up to the date of abandonment (when Form I-407 was submitted).
Form 1040-NR: Covers the portion of the year you were a non-resident alien, reporting only U.S.-source income for the remainder of the tax year.
File a full-year U.S. resident return (Form 1040) and report all worldwide income for the entire tax year. The IRS assumes December 31 as the default expatriation date for tax purposes. This option may be advantageous if you wish to file as Married Filing Jointly (MFJ), as it provides a higher standard deduction, lower tax rates, and eligibility for certain credits (e.g., Child Tax Credit, Earned Income Tax Credit) that are unavailable to Married Filing Separately (MFS) filers or non-resident aliens. For more information, refer to the article Can we file jointly or must my spouse file a separate return?
Additionally, if you were a long-term resident (i.e., held a Green Card for 8 or more of the last 15 tax years), abandoning your Green Card may trigger expatriation tax rules. You are required to file Form 8854 (Initial and Annual Expatriation Statement) to:
Certify tax compliance with U.S. tax obligations the 5 years prior to expatriation and avoid penalties.
Declare the net worth of your assets and liabilities.
Determine if you are a “covered expatriate", potentially triggering the exit tax.
Report any exit tax owed (only for covered expatriates).
❗ Important note: failure to file Form 8854 may result in the IRS automatically considering you a covered expatriate.
In the following year after expatriation, you will be treated as a non-resident alien and required to report only U.S.-source income.
Covered expatriate status
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.
Non-covered expatriates are not subject to additional taxes post-renunciation.
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.
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 if you abandoned a Green Card
To file your final tax return in the year you abandon your GC, you can choose to file a dual-status return (Forms 1040 and 1040NR) or a full-year return (Form 1040).
How to file a full-year return
Create a resident TQ for the year you abandoned your G.C. and select GC Holder.
Complete the TQ as normal and report U.S.-sourced and worldwide income.
How to file dual-status returns
In the year of abandoning your Green Card, complete two TQs: one GC Holder (USA) Questionnaire and one ''dummy'' Non-Resident (NRA) Questionnaire for 2005, as our system allows only one TQ per year.
To do it, follow these steps:
Create a resident TQ, select GC Holder, and report your income information up until the date you abandoned your Green Card (when Form I-407 was submitted).
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 U.S.-sourced income information from the date you abandon your Green Card till the end of the year.
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.
How to file Form 8854
If you have held your Green Card for 8 or more years, download Form 8854 and fill out parts I, II, and III, if applicable. You should not leave blanks - write N/A or "?".
Note: if you had held your Green Card from Dec 31, 2020 to Jan 1, 2021, it would be 2 years.
Upload Form 8854 to the Documents section once completed.
Submit your questionnaires for a tax preparer review. We will check Form 8854 for completeness and accuracy.
❗ Important note: we assist with Form 8854 only in conjunction with the tax return (not standalone).