Covered expatriate

Only an expatriate in the tax code’s sense can be covered. That means a citizen who gives up citizenship, or a long-term resident who gives up a green card. A long-term resident held a green card in at least 8 of the last 15 tax years, counting the year that status ends. Living abroad, on its own, makes no one an expatriate.

You make the certification under penalty of perjury on Form 8854, which every expatriate files for the year they leave. Two exceptions lift the tax and net worth tests. One covers some people who were dual citizens at birth. The other covers some who give up citizenship before age 18½. Neither lifts the certification, so a dual citizen who never files Form 8854 is still covered.

Covered status brings the exit tax: all your property is treated as sold at fair market value on the day before you expatriate. For 2026, the first $910,000 of net gain is excluded. The rest is taxed that year, unless you elect to defer the tax and post security. Your later gifts and bequests to US citizens or residents can cost them 40% of the value above the annual exclusion.

The $2 million test only decides who is covered. What you owe depends on your gains, plus separate rules for IRAs and deferred pay.