Expat tax · Section 877A
To renounce US citizenship, you sign an oath before a US consular officer abroad and pay a $450 fee.
Your citizenship ends on the oath date, once the State Department approves your Certificate of Loss of Nationality (CLN). For tax, you file Form 8854 with that year’s return, certifying five years of US tax compliance. If you meet any of the three tests below, you are a covered expatriate and may also owe an exit tax on unrealized gains.
Updated · Sources
Renouncing in 2026
- $450
- is the State Department fee from April 13, 2026, down from $2,350.
- $910,000
- of gain is excluded from the exit tax for a covered expatriate in 2026.
- $10,000
- is the penalty for not filing Form 8854, or for filing it incomplete or wrong.
Three tests decide what renouncing US citizenship costs in tax.
Most of the tax consequences of renouncing apply only to covered expatriates.
Average income tax above $211,000
You are covered if your average annual net income tax for the five tax years before you expatriate exceeds $211,000. That is the 2026 figure, and it is adjusted for inflation each year. For 2025 it was $206,000.
A net worth of $2 million or more
You are covered if your net worth reaches $2 million on the day you expatriate. The statute sets that figure, so it does not rise with inflation.
No certification of five years of compliance
On Form 8854, you certify under penalty of perjury that you met all your federal tax obligations. The certification covers the five tax years before the year you expatriate. If you do not certify, for any reason, you are covered at any income or net worth.
Two exceptions remove the income tax and net worth tests, but you must still certify five years of compliance. Dual citizens from birth qualify if they are still citizens and tax residents of the other country. Under the substantial presence test, they must have been US residents in at most 10 of the 15 tax years ending with their expatriation year. People who give up citizenship before age 18½ qualify if they were US residents for no more than 10 tax years.
If you are covered, renouncing taxes gains you never sold.
For a covered expatriate, the exit tax is regular income tax, charged on a deemed sale of their property.
Gain on the shares
$1,500,000
The shares count as sold at fair market value the day before you expatriate.
Gain left after the exclusion
$590,000
The 2026 exclusion comes off the gain before any tax.
IRA counted as paid out
$400,000
The whole balance counts as distributed the day before, with no early distribution tax.
Income added to the return
$990,000
That is the $590,000 of gain plus the $400,000 from the IRA.
Not a covered expatriate
$0
With no covered status, none of this is taxed when you expatriate.
The figures apply Section 877A to round amounts. A traditional IRA is a specified tax deferred account, so the exclusion does not reach it. The case assumes the IRA holds only pre-tax money and no asset carries a loss. The tax on the $990,000 depends on your other income and 2026 brackets, so no rate is applied.
Renouncing and relinquishing end US citizenship in different ways.
Both need a voluntary act, done with the intent to give up US nationality. The law requires no reason for renouncing US citizenship. Your motive matters only if duress or involuntariness is in question.
| Renouncing | Relinquishing | |
|---|---|---|
| What ends it | An oath before a US consular officer Or a diplomatic officer, under INA 349(a)(5) | Another listed act, done with intent Such as naturalizing elsewhere after 18 |
| Where | In person, outside the US You need not live in that consular district | Usually abroad An act done in the US counts only once you live abroad |
| Main form | DS-4080, the oath | DS-4079, a questionnaire |
| Fee for the CLN | $450 | $450 |
| Expatriation date for tax | The day of the oath | The day you tell the State Department In a signed statement |
At the embassy or consulate, you sign DS-4080, the form to renounce US citizenship. You also sign DS-4081, a statement that you understand the consequences. How long it takes to renounce US citizenship depends on two waits: for a consular appointment, then for approval of your CLN in Washington. For tax, the date in either column counts only once the CLN is issued.
What else changes when you give up US citizenship?
You still have returns to file
File any missing returns before you renounce, so you can certify all five years. If the lapse was non-willful, the streamlined procedures can limit penalties. They cover the three most recent years of returns and six years of FBARs.
You renounced without ever filing
An accidental American is a US citizen by birth who never filed a US return. If you are one and renounced after March 18, 2010, the IRS’s Relief Procedures for Certain Former Citizens may fit. If you qualify, you file six years of returns, owe no unpaid tax or penalties for them, and are not a covered expatriate. You need a net worth under $2 million, at most $25,000 of tax over the six years, and non-willful conduct.
Deferred pay can be taxed at 30% as it arrives
If you are covered, a US payer withholds 30% of each taxable payment of deferred pay as you receive it. For that, you give the payer Form W-8CE and waive any treaty reduction. If you do not, or a foreign payer has not agreed to withhold, the benefit’s present value is taxed the day before you expatriate.
Gifts to US recipients are taxed at 40%
The tax falls on the US citizen or resident who receives a gift or bequest from a covered expatriate. It is 40% of the value above the 2026 annual exclusion of $19,000, less any foreign gift or estate tax. Gifts that would qualify for the marital or charitable deduction are excluded. Property reported on a timely US gift or estate tax return is excluded too.
Putting off the tax takes security
You can defer the tax on each property until the return for the year you sell it. The latest it can wait is the return for the year of your death. You must post security, such as a bond, and waive any treaty right that would block the tax. Interest runs from the original due date until you pay.
The ban on renouncing to avoid taxes has no procedures
Immigration law makes a former citizen inadmissible if DHS finds they renounced US citizenship to avoid taxes. DHS has published no regulations for this rule, so no procedures to apply it are in effect.
A CPA can run the three tests before you sign the oath.
Valim’s CPAs prepare the US returns for expats renouncing US citizenship, from any years you missed to the year you expatriate.
- We check each test against your figures and estimate any exit tax before your appointment.
- We prepare any past-due US returns and FBARs, and work alongside your local accountant.
- We prepare the return for the year you expatriate, with any exit tax figured.
- We set estimated payments for the income a deemed sale adds.
- If the IRS sends a notice on a return we prepared, we handle the response, included in the fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
Renouncing US citizenship questions.
How much does it cost to renounce US citizenship?
Since April 13, 2026, it costs $450 to renounce US citizenship, the State Department’s fee for a Certificate of Loss of Nationality. It was $2,350 before that, and those who paid the old fee get no refund. The same fee applies when you relinquish citizenship instead, so neither route is free. Tax is a separate cost, and a covered expatriate may also owe the exit tax.
Why is it a bad idea to renounce US citizenship?
Renouncing is permanent unless the government overturns it because you acted without intent or under duress. To get citizenship back, you would have to naturalize. You need a visa or other authorization to visit the US, and you can be refused or barred. If you hold no other nationality, you become stateless. Taxes you already owe stay due, and Social Security paid abroad can stop. A covered expatriate may also owe the exit tax. US recipients of their gifts and bequests pay 40% above the annual exclusion.
What is the difference between relinquishing and renouncing?
Renouncing is one specific act: signing an oath of renunciation before a US consular officer abroad. Relinquishing is losing citizenship through another listed act done with intent, such as naturalizing elsewhere after 18. Both end with a Certificate of Loss of Nationality. If you later appeal, lack of intent or duress is much harder to show for a renunciation.
Can you still collect Social Security after renouncing?
Yes, you keep the Social Security benefits you earned. As a non-citizen, though, your payments stop after six full calendar months in a row abroad, unless an exception applies. Exceptions depend on your citizenship and residence, and cover citizens of Canada, Germany, Japan and the UK, among others. Unless a treaty says otherwise, 25.5% of each payment is withheld for US tax. SSA’s Payments Abroad Screening Tool shows whether an exception covers you.
Do I owe the exit tax?
You owe the exit tax only if you are a covered expatriate. You are covered if your net worth is $2 million or more, or if you do not certify five years of compliance on Form 8854. For a 2026 expatriation, average annual net income tax above $211,000 for the five prior years also makes you covered. Some dual citizens from birth and some who give up citizenship before 18½ escape the net worth and tax tests. A covered expatriate is taxed as if they sold their property the day before expatriating, on net gains above $910,000 for 2026. IRAs and deferred pay follow separate rules, with no exclusion.
What happens if you renounce your American citizenship?
Renouncing ends your US citizenship as of the oath date, but only after the State Department approves your Certificate of Loss of Nationality. If you renounce US citizenship, you still owe US tax on some income from US sources, usually as a nonresident alien. Every expatriate also files Form 8854 for the year they expatriate, even with no exit tax to pay.
Sources
- 8 U.S.C. § 1481, Loss of nationality by native-born or naturalized citizen; voluntary action; burden of proof; presumptions
- 8 U.S.C. § 1483, Restrictions on loss of nationality
- 8 U.S.C. § 1182(a)(10)(E), Former citizens who renounced citizenship to avoid taxation
- 22 C.F.R. § 50.50, Renunciation of nationality
- 22 C.F.R. § 22.1, Schedule of fees
- Department of State, final rule on the Certificate of Loss of Nationality fee (91 FR 12296, March 13, 2026)
- Department of State, Foreign Affairs Manual, 7 FAM 1210 (loss of US citizenship)
- 26 U.S.C. § 877A, Tax responsibilities of expatriation
- 26 U.S.C. § 877, Expatriation to avoid tax
- 26 U.S.C. § 6039G, Information on individuals losing United States citizenship
- IRS, Instructions for Form 8854 (2025)
- IRS, Notice 2009-85 (guidance on Section 877A)
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- IRS, Rev. Proc. 2024-40 (2025 inflation adjustments)
- 26 U.S.C. § 2801, Imposition of tax (gifts and bequests from covered expatriates)
- IRS, Relief Procedures for Certain Former Citizens
- IRS, Streamlined filing compliance procedures
- IRS, US taxpayers residing outside the United States (Streamlined Foreign Offshore Procedures)
- 42 U.S.C. § 402(t), Payments to aliens outside the United States
- Social Security Administration, Your Payments While You Are Outside the United States (Publication 05-10137, April 2026)
Reviewed and updated September 2026. General information, not advice for your situation.