US Exit Tax Explained: Section 877A, Covered Expatriates & Form 8854

Most people who give up US citizenship or a green card owe no exit tax. The exceptions are covered expatriates: anyone with a net worth of $2 million or more, an average income tax bill above $211,000 over the previous five years (2026), or an uncertified five-year compliance record. Covered expatriates are treated as if they sold nearly everything they own the day before they leave, and the US exit tax applies to the gain above a $910,000 exclusion. The compliance test catches the most people, because skipping Form 8854 or missing a single required filing can make anyone covered, whatever their wealth. Retirement accounts, deferred compensation and trusts follow their own rules, and gifts to US family members afterward can trigger a separate 40% tax.

Key Takeaways

• Who owes it? Only expatriates citizens who renounce and long-term green card holders who give up status, and who meet at least one of three tests.
• What are the 2026 tests? A net worth of $2 million or more, an average annual income tax liability above $211,000 for the five prior years, or a failure to certify five years of tax compliance.
• What does it tax? Unrealized gain, as if you had sold your property the day before you left, above a $910,000 exclusion for 2026.
• What catches people who are not wealthy? The certification test. An unfiled return, or no Form 8854, can make anyone a covered expatriate.
• Does everything count as a sale? No. IRAs, pensions and other deferred compensation, and trust interests follow separate rules.
• Does it end when you leave? Not always. A US citizen or resident who receives a gift or inheritance from a covered expatriate can owe a 40% tax and must file Form 708.

Handing in a passport or a green card feels like the end of a process. For the IRS, it is a taxable event with its own form, its own deadlines and, for some people, its own bill. The US exit tax gets most of the attention, but it is rarely the only cost, and it is not always the one that surprises people most. This guide explains who the rule reaches, how the deemed sale works, what Form 8854 actually asks for, what changes for green card holders and which steps can reduce or remove the exposure before you leave. It is updated for 2026.

Exit Tax Decision Table: Check Your Position Before You Renounce 

Use this table before you book a consular appointment. Work through the steps in order, starting with your status, then your tax compliance, then the two wealth tests. Each row tells you where your answer leads. Each step is explained in detail later in this guide. 

If you are a covered expatriate, the deemed sale applies to gain above the $910,000 exclusion for 2026. IRAs, deferred compensation and trusts follow their own rules. Gifts to US family can face the 40% tax reported on Form 708, so plan before you take the oath. This is a general guide for expatriations in 2026. Thresholds change every year, so confirm the figures for your expatriation date. 

What Is the US Exit Tax Under Section 877A? 

Congress created the modern exit tax in 2008 through the HEART Act, and it sits in Section 877A of the Internal Revenue Code. The wider regime is known as the expatriation tax: a set of rules for people who leave the US tax system by renouncing citizenship or by ending long-term residency. Under the Section 877A exit tax, a covered expatriate is treated as having sold almost all worldwide property at fair market value on the day before the expatriation date, even though nothing was actually sold.

The US expatriation tax is easy to misread, so it helps to be clear about what it does not cover:

• It is not a tax on moving abroad. Living overseas for decades does not trigger it. The rule applies only when you formally expatriate.
• It is not a tax on everyone who renounces. Most people who give up citizenship or a green card are not covered and owe no exit tax.
• It is not the consular fee. The State Department charge for renunciation is separate and much smaller.
• It is not always a one-time event. Deferred tax, certain pensions and trust interests can create annual reporting for years.

The expatriation tax rules also depend on when you expatriated, so check the date first. This guide covers people who expatriated on or after June 17, 2008, who fall under Section 877A. Earlier expatriations fall under older rules in section 877 with different tests, and the IRS describes them separately. In short, the US citizenship renunciation tax covers the exit tax itself, the filings around it and, for some families, a 40% tax on later gifts.

Who Counts as an Expatriate

An expatriate is a US citizen who relinquishes citizenship, or a long-term resident who stops being a lawful permanent resident. The exit tax for US citizens applies only after a formal act of relinquishment. A second passport, years abroad or a lapse in filing does not make you an expatriate, and none of them ends your US tax duties.

For a citizen, the expatriation date is the earliest of four dates:

The date matters because it sets which year's thresholds apply, which tax year the initial Form 8854 belongs to, the day your net worth is measured and where the five-year look-back ends.

How Renunciation Works, Step by Step

You cannot renounce US citizenship inside the United States. The process happens at a US embassy or consulate abroad, and it is permanent.

1. Book an appointment. Demand has grown, and some busy posts have waits of several months, so build that into your timeline.
2. Complete the State Department forms. You answer a questionnaire about your circumstances and sign a statement confirming that you understand the consequences.
3. Attend an in-person interview. A consular officer checks that your decision is voluntary and informed.
4. Take the oath of renunciation. Your expatriation date for tax purposes generally becomes the date of the oath, provided the State Department later issues the Certificate of Loss of Nationality.
5. Receive your Certificate of Loss of Nationality (CLN). Keep it, because you will need it for the tax filing and for many foreign and financial records.
6. File Form 8854 with your tax return for the year. The immigration process ends at the consulate, but the tax process does not.

Green card holders follow a different immigration route, using Form I-407, but the tax side still requires Form 8854.

Covered Expatriate Test: The Three Tests You Must Know 

Only a covered expatriate owes the US exit tax, and the covered expatriate test has three parts. Meeting any one of them is enough.

The covered expatriate rules apply the figures for the year you expatriate. A 2026 expatriation uses the 2026 thresholds, even though the matching Form 8854 is filed with your 2026 return in 2027.

Each test works differently in practice:

• The tax liability test measures tax, not income. A salary of several hundred thousand dollars can produce a small US bill after the foreign tax credit and the foreign earned income exclusion, so many Americans abroad stay well below the threshold.
• The net worth test looks at everything. It covers worldwide assets less liabilities on one day, including a home, businesses, retirement accounts, crypto and interests in certain trusts. Documented valuations matter.
• The certification test turns on paperwork. You certify, under penalties of perjury, that you met all US federal tax obligations for the five years before expatriation. A missing return, a skipped FBAR or an unfiled information return can break that certification.

What Counts as Compliance for the Certification

The certification test covers all federal tax obligations for the five years before expatriation, not only income tax returns. These are the items that most often break it:

Proposed rules would reduce some foreign pension filings, but they have not been finalized, so rely on them only with advice. If any item is missing, fix it before you certify, through the Streamlined procedures or the IRS relief procedures where they fit. Certifying something untrue creates a bigger problem than a late filing.

The Dual-Citizen and Minor Exceptions

Two groups can sidestep the first two tests:

• Dual citizens from birth. If you became a US citizen and a citizen of another country at birth, you still hold and are taxed as a resident of that other country, and you were a US resident for no more than 10 of the last 15 tax years, the net worth and tax liability tests do not apply.
• Certain minors. If you were under age 18½ on the expatriation date and a US resident for no more than 10 tax years, the same two tests do not apply.

Neither exception reaches the certification test, so both groups still need five years of compliance and a properly filed Form 8854. Many accidental Americans are caught here, which is why the relief procedures later in this guide matter.

A Quick Self-Check

1. Net worth. Is your worldwide net worth close to $2 million once your home, retirement accounts and any business are included?
2. Five-year compliance. Have you filed a US return for each of the last five years, with every required schedule and information return?
3. Foreign account reporting. Have you filed FBARs and Form 8938 where required?
4. Birth citizenship. Were you a dual citizen from birth, with limited US residence?

If any answer is uncertain, resolve it before you sign anything at the consulate.

Three Common Profiles

The covered expatriate rules can affect people in very different financial situations. Your net worth, tax liability, and ability to certify five years of federal tax compliance all matter. These three examples show how the rules may apply and what you should review before expatriating.

The third profile surprises people. The exclusion only reduces the deemed-sale gain on ordinary property. It does not shelter an IRA, so a person who is covered because of a filing gap can owe tax on retirement accounts even with modest wealth.

Which year's numbers apply also trips people up. If you expatriate in 2025 and file in 2026, the 2025 figures apply: $206,000 and $890,000. If you expatriate in 2026, use $211,000 and $910,000.

How the Section 877A Mark-to-Market Exit Tax Works 

The Section 877A mark-to-market tax follows four steps:

1. Value everything. Each asset is valued at fair market value on the day before the expatriation date.
2. Compare value to basis. Each asset produces a gain or loss as if you had sold it that day.
3. Net the results and subtract the exclusion. The exclusion is $910,000 for 2026 and $890,000 for 2025, and it cannot take the result below zero.
4. Tax the remainder on your expatriation-year return. The character of each gain, short or long term, is set as if the sale were real, so long-term gains are generally taxed at 0%, 15% or 20%.

Three details help. The wash-sale rule does not apply to losses in the deemed sale, so a loss is not disallowed just because you held or reacquired similar assets. Losses offset gains to the extent the Code otherwise allows. And the deemed sale covers most property, including shares, funds, real estate in any country, private business interests, art and crypto.

Illustration: Maria, a US citizen living in Portugal, renounces in 2026 with a net worth of $3.2 million, so she is a covered expatriate under the net worth test. Her brokerage account is worth $1.9 million against a basis of $1.1 million, a gain of $800,000. A rental flat bought for $400,000 is now worth $750,000, a gain of $350,000. Her net gain is $1,150,000. After the $910,000 exclusion, $240,000 is taxable. At long-term capital gains rates of 15% or 20%, that is roughly $36,000 to $48,000 before any state tax or other items, depending on her total income that year. Her IRA is handled separately under the rules below and could add far more.

If your main home is part of the deemed sale, the home-sale exclusion may reduce the gain, so ask your adviser to test it on your facts.

Worked Example: Investments, Real Estate and Retirement Accounts 

To see how each asset type is taxed, here is Maria’s example again, split by asset. Her $3.2 million net worth is a $1.9 million brokerage account, a $750,000 rental flat, a $450,000 traditional IRA and $100,000 in cash. 

• 
  Step 1: Investment gains. The brokerage account has an 800,000gain(1,900,000 less $1,100,000). It is generally taxed as a long-term gain at 0%, 15% or 20%. 

• Step 2: Real estate. The rental flat has a 350,000gain(750,000 less $400,000). A main home could use the home-sale exclusion, but a rental generally does not qualify. 

• Step 3: Combine the gains and apply the exclusion. The two gains total $1,150,000. After the $910,000 exclusion, $240,000 is taxable, which is roughly $36,000 to $48,000 at 15% to 20%. 

• Step 4: Retirement account. The IRS treats the $450,000 IRA as paid out in full, and the exclusion does not reduce it. It is taxed as ordinary income. At an effective federal rate of 24% to 35%, that is roughly $108,000 to $157,500. 

• Result. Maria’s federal tax is roughly $144,000 to $205,500 before state tax. About three-quarters of it comes from the IRA, not from the brokerage account or the flat. 

These figures are for illustration only. Your result depends on your basis records, other income, filing status and the tax rates for the year you expatriate. 

Assets Excluded from the US Exit Tax and Special Tax Rules 

The deemed sale is the default under the US exit tax, not the rule for everything. Retirement accounts and similar items are carved out and taxed in their own way.

Everything else you own follows the standard deemed-sale rule instead. These are the assets people most often overlook, along with what to document for each. 

Two practical points. A Form W-8CE goes to the payer, not the IRS, and it is generally due by the earlier of the day before the first post-expatriation payment or 30 days after the expatriation date. And the deemed distribution from an IRA can be the largest part of the bill for people whose wealth sits in retirement accounts. For more on retirement accounts abroad, see NSKT Global's guide to retirement planning for expats. 

How to Defer the US Exit Tax Under Section 877A 

A covered expatriate can elect to defer payment of the mark-to-market tax on property, asset by asset, until the asset is sold or the due date of the return for that year.

• You elect on Form 8854. The deferral request is part of the form, and the IRS gives specific mailing instructions for it.
• It carries conditions. A deferral generally requires adequate security and a waiver of treaty benefits, and interest accrues on the deferred tax.
• It creates annual reporting. You file an annual Form 8854 each year the deferral applies, so the paperwork continues after you have left.

Deferral helps when the tax would otherwise force you to sell an illiquid asset such as a business or property, but it ties you to the US system for longer.

Form 8854 Requirements: Who Files, When and What It Contains

Form 8854 is the Initial and Annual Expatriation Statement. It is the reporting and certification form under section 6039G, and it is not the US exit tax itself. The form certifies five years of compliance, reports your assets and determines whether you are covered. The Form 8854 requirements apply to everyone who expatriates, whether or not they are covered.

Who Must File

• Every citizen who relinquishes citizenship, whatever their net worth.
• Every long-term resident who ends US residency.
• Former expatriates with ongoing items, such as deferred tax, eligible deferred compensation or a nongrantor trust interest, who file an annual statement.

What the Form Contains

When and Where to File

Attach the initial Form 8854 to your income tax return for the year that includes the expatriation date, and file it by that return's due date, including extensions. If you do not have to file a return, mail the form by the date the return would have been due. Your return type and due date depend on your status on December 31, so confirm both before you rely on the usual June 15 and October 15 extensions for Americans abroad.

Your Expatriation-Year Return

The year you expatriate is a full calendar year, not a short one. You are a US resident until the expatriation date and a nonresident afterward, so the return usually has two parts.

• Check your status on December 31. After expatriation you are generally a nonresident alien at year-end, which usually means filing Form 1040-NR marked as a dual-status return.
• Report each part under its own rule. For the resident part, you report worldwide income. For the nonresident part, you report US-source income and certain US business income.
• Attach Form 8854. The form goes with the return, and the deemed-sale gain, if any, is reported on it.
• Expect special rules. Your filing status, deadline and spouse's options can differ from a normal return.

Even with no US income at all, check whether a return is still required for the year. Ask a preparer to confirm the right form before the deadline.

Documents to Gather for Form 8854 

Net worth is measured on the expatriation date and the deemed sale values your assets the day before, so ask each custodian and appraiser for figures as of those dates. Use this checklist to collect your tax records and valuations in one place. 

Penalties 

Failing to file a complete and timely Form 8854 can bring a penalty of $10,000, and it also means you cannot certify compliance, which makes you a covered expatriate whatever your wealth. If you expatriated years ago and never filed, the IRS has a process for catching up, and the cost of waiting rises with every year.

For line-by-line help, see NSKT Global's guide to Form 8854 and its walkthrough on how to file Form 8854.

Exit Tax for Green Card Holders: The Eight-Year Rule

The exit tax for green card holders turns on a count of years rather than on citizenship. A green card holder is a long-term resident if they held lawful permanent resident status in at least 8 of the 15 tax years ending with the year the status ends.

• Partial years count. A part of a year as a green card holder generally counts as a full year, so someone who feels they have been a resident for six or seven years may already be over the line.
• Treaty years can drop out. A year in which you were treated as a resident of a treaty country, and did not waive treaty benefits, does not count toward the eight.
• Tax residency does not end when you leave. A green card holder generally stays a US tax resident until the status is formally abandoned or revoked, even after moving abroad.
• Two steps, not one. Filing Form I-407 ends immigration status, but the tax side requires its own Form 8854.
• A treaty claim can end residency. Claiming residence of another country under a treaty can itself be treated as ending long-term resident status, which is a common cause of an unintended expatriation.

The simplest planning point is timing. Someone who gives up the card before reaching eight years is not a long-term resident and is outside the exit tax. Someone who is already a long-term resident faces the same three tests as a citizen. The dual-citizen exception applies to people who became US citizens at birth, so it is not available to a green card holder. See NSKT Global's guide to the green card exit tax for the year count in detail.

Tax Obligations That Continue After Renouncing US Citizenship 

The 40% Tax on Gifts and Inheritances

Leaving the US system does not always close the file. The US exit tax falls on you, but Section 2801 can fall on your family. Section 2801 imposes a tax on US citizens and residents who receive covered gifts or covered bequests from a covered expatriate. The tax is 40%, it is paid by the US recipient rather than the expatriate and it is reported on Form 708.

• It applies to transfers received on or after January 1, 2025, under final regulations issued in January 2025.
• There is an annual exclusion. Transfers are taxable only above the annual gift exclusion, which is $19,000 for 2025 and 2026.
• Some transfers are excluded. Gifts that would qualify for a marital or charitable deduction, and property passing by a qualified disclaimer, are generally outside the tax.
• Foreign gift and estate tax can be credited. A credit is available if foreign tax was paid on the transfer.
• The first Form 708 is reported as due June 15, 2027, for covered transfers received during 2025.
• There is no expiry date. A gift or inheritance received many years after expatriation can still be covered.

This is a cost for your family, not for you, so it is worth raising before you decide. For the wider estate picture, see NSKT Global's guide to US expat estate planning.

Other Ongoing Rules

• US-source income stays taxable. A former citizen or resident is generally taxed as a nonresident on US-source income, such as US rental income, so a US return can still be needed.
• Deferred compensation payments keep their withholding. Eligible deferred compensation continues to face 30% withholding.
• Annual reporting can continue. If you deferred tax or hold deferred compensation or a trust interest, you keep filing an annual Form 8854.

Can You Visit the US Afterward? The Reed Amendment

People often worry that renouncing will bar them from the US. The concern comes from the Reed Amendment, a 1996 immigration provision. It makes a former citizen inadmissible if the Attorney General finds that they renounced to avoid US taxation.

In practice, commentators describe it as rarely, if ever, enforced. The provision has never had implementing regulations, and DHS has said it cannot get the information it would need unless the person admits their reasons. It also relies on subjective intent, while the exit tax uses objective tests, so owing exit tax or being a covered expatriate does not by itself show a tax-avoidance motive. Surrendering a green card does not create a similar travel bar.

After you renounce, you travel to the US as a foreign national, under the visa or visa-waiver rules for your other citizenship. If US travel matters to you, ask an immigration lawyer before the oath and keep your reasons for renouncing documented and truthful.

State Taxes and Sticky States

The exit tax is federal. No state charges a general fee for leaving, and California does not have an exit tax either. Past proposals to tax former California residents did not become law, and a one-time wealth tax aimed at billion-dollar holders was scheduled for the November 2026 ballot, so check its status at publication.

The real exposure is residency. A state can keep taxing you until you genuinely change domicile, and it can tax income from sources in the state after you leave.

• Residents are taxed on everything. A part-year resident is taxed on all income while a resident.
• Sources stay taxable. Property, businesses and work done in the state can stay taxable after you move.
• Ties decide the question. A driver's license, voter registration, a home you keep, bank accounts, family and time spent in the state all count.
• The deemed gain may follow you. Some states start from federal income, so ask whether yours would tax the deemed-sale gain.

If you plan to expatriate, cut ties with your former state on purpose, keep a dated record of each step and file a final part-year return there where required.

Cost to Renounce US Citizenship in 2026: Fees and Tax Implications 

The direct cost to renounce US citizenship in 2026 is a $450 State Department fee, but that is only the start.

The fee cut helps at the embassy, but it does not change any IRS rule. For most people with meaningful assets, the real cost sits in the tax, not the fee, and the US exit tax is only one part of it.

Legal Ways to Reduce or Avoid the Exit Tax

Reducing the US exit tax works best when planning starts well before the expatriation date, because every test looks backward or measures one fixed day.

A few notes on the strategies:

• Gifts to a spouse. Gifts to a US citizen spouse are unlimited and tax-free, so they can lower your net worth, but the spouse then owns the assets and could face their own questions later. Gifts to anyone else count against the lifetime exemption, which is $15 million per person for 2026 under current law. Some specialists advise making large gifts in the year before expatriation rather than the year of it.
• Compliance first. A person well under the wealth tests can still be covered because of an unfiled return, so back-filing is often the highest-value step.
• Disposals. Selling an appreciated asset before leaving triggers tax under ordinary rules, while leaving it to the deemed sale lets the $910,000 exclusion absorb gain up to that amount. The better route depends on the size of your gains.

What Does Not Work

• Undervaluing assets to stay under $2 million. Valuations are reported under penalties of perjury.
• Leaving assets off the form. Form 8854 asks for a worldwide balance sheet.
• Skipping Form 8854. Not filing makes you a covered expatriate.
• Moving to a low-tax country. The exit tax follows your status, not where you live.

For a deeper look, see NSKT Global's guide to avoiding the exit tax legally and its comparison of exit tax and capital gains tax.

IRS Relief Procedures for Certain Former Citizens

The IRS runs a program for former citizens, many of them accidental Americans, who never knew they had to file. If you qualify, you can come into compliance and avoid covered expatriate status without penalties.

You generally qualify if all of these are true:

• You relinquished citizenship after March 18, 2010.
• Your failure to comply was non-willful. Negligence or a good-faith misunderstanding can qualify, and willful conduct does not.
• You have no filing history as a US citizen or resident. A Form 1040-NR filed in good faith does not necessarily disqualify you.
• Your net worth was under $2 million on the expatriation date and when you submit.
• Your US tax was $25,000 or less in total for the expatriation year and the five years before it, after allowable credits and exclusions.
• You can submit the full package: returns for the six years and Form 8854, with FBARs where required.

The program does not cover green card holders. For people who remain US taxpayers and need a different catch-up route, see NSKT Global's guide to the Streamlined Filing Compliance Procedures.

Never Filed Form 8854 After Expatriation? What to Do Next 

The IRS has separate guidance for people who expatriated but never filed Form 8854 or the related income tax returns. The longer the gap, the more it costs.

• Without a filed form, you cannot have certified compliance. The IRS treats the missing form as a failure to certify, so you can be a covered expatriate by default.
• A penalty can apply. The late-filing penalty is $10,000 for each failure, and it may be reduced if you show reasonable cause.
• Start with the returns. The late Form 8854 usually goes in with any missing income tax returns and information returns for the relevant years.
• Check the relief procedures first. If you meet every requirement, the relief procedures can resolve the situation without penalties and without covered expatriate status.
• Keep records of why you missed the filing. A written account of what you knew and when supports a non-willful position.

For a step-by-step path, see NSKT Global's guide to Form 8854.

Alternatives Worth Pricing First

Many of the problems that push people toward renunciation can be fixed without giving up a passport. The foreign earned income exclusion, which is $132,900 for 2026, and the foreign tax credit often reduce the US bill to zero for Americans in higher-tax countries. Treaties, the Streamlined procedures and good record-keeping handle much of the rest. Compare the cost of staying compliant with the cost of leaving before you decide, because renunciation is irreversible. See NSKT Global's guides on the foreign earned income exclusion, the foreign tax credit and whether to renounce.

Special Situations

• You are an accidental American. Citizenship by birth in the US or through a parent can arrive without your knowing it. Check whether the dual-citizen exception and the relief procedures apply before you do anything else.
• You have a US citizen spouse and community property. Ownership of assets between spouses, and local property rules, can change whose net worth is measured and how gifts work. Take advice before you transfer anything.
• You own a private business or foreign real estate. These need documented valuations, and the deemed sale can create tax with no cash to pay it. Deferral may help.
• You hold crypto. It is part of the deemed sale and should appear on the balance sheet. Keep records of basis.
• Your gains are below the exclusion. A large unrealized gain can still produce no tax, but you must still file Form 8854 and certify compliance.
• You expatriated years ago and never filed. See the section above on catching up. The earlier you act, the better.
• You are leaving mid-year. Your year is split between resident and nonresident periods, so the final return needs careful income allocation.
• Your children or grandchildren live in the US. Section 2801 can reach what they receive from you, so plan gifts and your will with that in mind.
• You want to give up a green card after a long absence. Check whether you are still treated as a resident, and avoid treaty positions that create an accidental expatriation.

How NSKT Global Can Help

The US exit tax is the headline cost of giving up US status, but it is only part of a decision you cannot reverse, and the most expensive mistakes are made before the consular appointment, not at it. The right order of steps, a clean compliance record and a realistic valuation can be the difference between a simple filing and a six-figure bill.

NSKT Global's expat tax team works with citizens and green card holders at every stage of the decision, from those still weighing whether to leave to those who left years ago and never filed. We can help you:

• test your position against all three covered expatriate tests before you commit
• bring five years of returns, FBARs and information returns up to date so you can certify
• value assets, model the deemed sale and compare it with selling under ordinary rules
• plan retirement accounts, deferred compensation and trust interests, including Form W-8CE
• prepare the final-year return and Form 8854, including any deferral election, or file a late Form 8854 if you left years ago
• advise your family on the 40% tax on gifts and inheritances, and file Form 708 when it applies

If you are thinking about leaving, or already have, talk to us before the oath, or as soon as you realize something was missed. Fixing a compliance gap early is almost always cheaper than explaining it later.

People Also Ask

Q. What is a covered expatriate?

A covered expatriate is an expatriating citizen or long-term resident who meets at least one of three tests: net worth, average tax liability or the five-year compliance certification.

Q. Do I have to file Form 8854 if I am not a covered expatriate?

Yes. Everyone who renounces citizenship or ends long-term residency files Form 8854, and not filing it can make you a covered expatriate.

Q. How much does it cost to renounce US citizenship in 2026?

The State Department fee is $450 as of April 13, 2026, down from $2,350. The exit tax, filing fees and any back filings are separate.

Q. Does the exit tax apply to green card holders?

Yes, to long-term residents, meaning people who held a green card in at least 8 of the last 15 tax years. Giving up the card before that point generally avoids the rule.

Q. What happens to my IRA and 401(k) if I am a covered expatriate?

An IRA is generally treated as fully distributed the day before expatriation, with tax due on the deemed distribution. A 401(k) or employer pension is usually taxed as deferred compensation, with 30% withholding on future payments if it qualifies.

Q. Which form do I file in the year I renounce?

Usually Form 1040-NR is marked as a dual-status return, with Form 8854 attached, because you end the year as a nonresident. Confirm with a preparer, since the answer depends on your status and income.

Q. Can I visit the US after renouncing?

Yes, as a foreign national under the visa rules for your other citizenship. The Reed Amendment is rarely, if ever, enforced, but ask an immigration lawyer if travel matters to you.

Q. Do I still file US taxes after I renounce?

Only on US-source income, as a nonresident, plus an annual Form 8854 if you deferred tax or hold deferred compensation or a trust interest.

Q. Is there a state exit tax?

Generally no. States tax you based on residency and source income, so cut ties with your former state deliberately.

Q. Can I avoid the exit tax legally?

Often yes. Fixing compliance gaps, leaving a green card before year eight, reducing net worth and planning gifts and asset sales can keep you from being a covered expatriate or reduce the tax.

Q. Does the exit tax affect my family?

It can. A US citizen or resident who receives a gift or inheritance from a covered expatriate may owe a 40% tax above the annual exclusion and must file Form 708.