Leaving the United States

A US citizen or resident alien is taxed on worldwide income from all sources and must report all taxable income and pay tax under the Internal Revenue Code, wherever they live. Moving is not an event the tax code recognises.

INA Section 349 lists seven potentially expatriating acts. An act only counts if performed voluntarily and with the intention of relinquishing US nationality, and the outcome is a Certificate of Loss of Nationality rather than an automatic status change.

For a citizen the expatriation date is the earliest of four events: renouncing before a diplomatic or consular officer, furnishing a statement of relinquishment, the State Department issuing a Certificate of Loss of Nationality, or a court cancelling a naturalisation certificate.

A green card is not outside this. You are a long-term resident if you were a lawful permanent resident in at least 8 of the last 15 tax years ending with the year you stop being treated as one, and a long-term resident who gives up that status is treated as expatriating.

For a long-term resident the date is the earliest of filing Form I-407 to abandon status, a final administrative or judicial determination of abandonment, a removal order, or beginning to be treated as resident of a treaty country without waiving the treaty benefits.

IRC 877A imposes a mark-to-market regime: all property of a covered expatriate is deemed sold for its fair market value on the day before the expatriation date. Nothing has to change hands for the gain to be taxed.

The gain the deemed sale would otherwise put in your income is reduced, but not below zero, by an exclusion amount. It was USD 600,000 in 2008 and is adjusted for inflation each year. For calendar year 2025 it is USD 890,000.

First test: your average annual net income tax for the 5 years ending before expatriation is above an inflation-adjusted figure. It was USD 190,000 for 2023, USD 201,000 for 2024 and USD 206,000 for 2025. Note this is tax paid, not income earned.

Second test: your net worth is USD 2 million or more on the date of expatriation or termination of residency. This figure carries no inflation adjustment, so it has caught steadily more people every year since 2008.

Third test, and the one with no dollar figure attached: you fail to certify on Form 8854 that you complied with all federal tax obligations for the 5 years preceding expatriation. Paperwork alone can make you a covered expatriate at any level of wealth.

Form 8854 is the initial and annual expatriation information statement. The initial one is attached to your income tax return and filed by that return's due date. Owing no tax does not remove the deadline.

Failing to file Form 8854 carries a penalty of USD 10,000 a year unless you can show reasonable cause. It is also the third covered-expatriate test, so the same omission can both fine you and change your tax status.

A US person must file an FBAR if their foreign financial accounts exceed USD 10,000 in aggregate at any time during the calendar year. It is a high-water mark across all accounts together, not a year-end balance and not a per-account figure.

The FBAR is FinCEN Form 114, filed electronically through FinCEN's BSA E-Filing System and not with your tax return. It is due April 15, with an automatic extension to October 15 if that date is missed.

Living abroad gets you an automatic two-month extension, to June 15 for a calendar-year filer, and Form 4868 can push it to October 15. The extension is on filing, and it does not stop the obligation existing.

Net worth of USD 2 million on the expatriation date makes you a covered expatriate on its own, with no inflation adjustment to the threshold.

The deemed-sale gain is reduced by USD 890,000 for calendar year 2025. Everything above that is taxable in the year you go.

Average annual net income tax above USD 206,000 for 2025, measured over the 5 years before you leave, is the first of the three tests.

Not filing Form 8854 costs USD 10,000 a year and can make you a covered expatriate regardless of your wealth.