Expatriation & Exit Tax
Giving up U.S. citizenship or a long-held green card can trigger a tax on everything you own, as if you sold it the day before you left. Whether it does depends on tests that can be planned around.
We advise citizens and long-term residents before they expatriate: whether they would be covered, what the exit tax would be, how to reduce it and how to file Form 8854 correctly.
Three tests decide whether the exit tax applies. One of them is about paperwork.
You are a covered expatriate if your average annual income tax over the prior five years exceeds a threshold, if your net worth is $2 million or more, or if you cannot certify five years of full tax compliance.
A covered expatriate is treated as having sold all property at fair market value the day before expatriating, with an exclusion for the first portion of gain. Deferred compensation and certain trusts are taxed under separate rules.
Gifts and bequests from a covered expatriate to U.S. persons are later taxed to the recipient. The status follows the family.
The expatriation thresholds for 2026.
From IRS inflation adjustments and the Form 8854 instructions.
The net worth test is not indexed. The compliance certification is made under penalty of perjury on Form 8854. Sources: IRS, Rev. Proc. 2025-32; IRS, Instructions for Form 8854; IRS, Expatriation Tax.
What we do before and after expatriation.
Covered expatriate analysis
Income tax, net worth and certification tests applied to your facts, with the planning room identified.
Pre-expatriation planning
Gifts, timing, asset restructuring and compliance cleanup that can take you out of covered status or lower the tax.
Mark-to-market computation
Deemed sale of all property, the exclusion, deferred compensation and trust interests.
Long-term residents
The eight-of-fifteen-year test, treaty tie-breakers that can trigger expatriation unintentionally and the timing of surrender.
Form 8854 and the final return
The dual-status final year, Form 8854 and the certifications it requires.
Gifts and bequests after expatriation
Planning for U.S. family members who would otherwise be taxed on what they receive from a covered expatriate.
How expatriation planning runs.
Started a year or more before the date whenever possible.
Assess
Residency history, five years of returns, net worth and family in the United States.
Plan
Steps that reduce covered status or the tax, in the right order and tax year.
Expatriate
Renunciation or green card surrender on the chosen date, with evidence preserved.
File
Final dual-status return and Form 8854, with the certifications supported.
Lawyers who plan the structure and defend it.
Structure before the move, the investment or the sale.
Residency timing, entity choice, trusts and elections are decided together, with the home-country result in view. We coordinate with your accountants and counsel abroad so the plan works in both places.
Compliance and controversy in the same hands.
Foreign asset reporting, penalty exposure, streamlined and voluntary disclosures and IRS examinations. The firm also litigates and arbitrates, so a plan is written knowing how it will be tested.
The expatriation date is a tax date. Choose it.
Once the oath is taken or the card is surrendered, the planning window closes.
- Confirm five years of complete, correct returns and foreign asset filings
- Value every asset, including pensions and trust interests
- Consider the position of U.S. children and heirs
- Coordinate the date with immigration counsel and the consulate
- Renounce before cleaning up prior years; the certification will fail
- Claim treaty residence elsewhere on a return as a long-term resident without advice; it can trigger expatriation
- Assume retirement accounts are outside the computation
- Make large gifts to U.S. family after the date without planning
From the firm’s writing.
U.S. Exit Tax Rules and Expatriation Planning
The tests, the tax and the planning.
Read the articleGreen Card Taxes: Stay or Exit
When keeping the card costs more than giving it up.
Read the articleFBAR and FATCA Risks for U.S. Expats
The filings the certification depends on.
Read the articleFrequently asked.
A U.S. citizen or long-term resident who, on expatriation, has a net worth of $2 million or more, or an average annual net income tax above the threshold ($211,000 for 2026), or who cannot certify five years of U.S. tax compliance. Meeting any one test is enough.
A mark-to-market tax: a covered expatriate is treated as having sold all property at fair market value the day before expatriating. Gain above the exclusion ($910,000 for 2026) is taxed. Deferred compensation, certain tax-deferred accounts and trust interests are taxed under separate rules.
Only for a long-term resident: someone who held a green card in at least eight of the last fifteen tax years. Shorter holders can surrender without the regime. Claiming treaty residence in another country can also count as expatriation for a long-term resident.
Often, with time. Gifts to a spouse or others, timing of the expatriation year and cleanup of prior filings can bring you below the thresholds or satisfy the certification. Planning after the date is not possible.
If you are a covered expatriate, U.S. recipients of gifts or bequests from you are subject to a tax on what they receive, with the recipient responsible for it. Planning before expatriation can address this.
Other areas of the practice.
Inbound and outbound services, from pre-immigration planning to offshore compliance. Back to the overview.
Considering renunciation or surrendering a green card?
A confidential consultation before the date is set. We will tell you whether you would be covered, what it would cost and what changes it.