How to renounce US citizenship: process, costs, and exit tax
This article is for informational purposes only and does not constitute legal advice.
Always consult with a tax professional for your specific circumstances.
To renounce US citizenship is more than signing forms – it’s a defining moment that ends your legal and tax obligations to the United States. The process, which begins at a US consulate abroad, makes the decision final for many Americans living overseas. For some, the exit tax adds another layer of complexity.
These can turn a personal choice into a financial milestone that demands careful planning and expert review. That’s why Form 8854 and covered expatriate status matter so much – both define how your last US filings close and whether future assets face additional tax.
This article is brought to you by Taxes for Expats, a trusted partner helping Americans abroad navigate complex filings with confidence. We coordinate final returns and Form 8854 to ensure your transition aligns with IRS rules and your personal plans. Learn more about our services or contact us to get started.
Why Americans abroad consider renouncing
For many Americans living overseas, the frustrations of banking, taxes, and paperwork can shape an intention to relinquish citizenship, which often begins from minor administrative inconveniences and then grows into a series of barriers that influence major life decisions, including the final choice to formally cut ties with the United States. These challenges tend to fall into a few recurring patterns that reflect the most common struggles faced by Americans abroad.
- Foreign banks have become increasingly cautious when dealing with US clients, mainly because the Foreign Account Tax Compliance Act (FATCA) requires them to report account details or face a 30 percent withholding penalty. Many institutions prefer to limit exposure entirely. In Paris, for example, a bank might deny an application for a current account once its compliance system detects ties to the Internal Revenue Service.
- The United States runs a citizenship-based tax system, meaning that citizens must continue filing tax returns on their worldwide income, no matter where they live. This often leads to dual reporting and overlapping rules. A teacher in Singapore, for instance, still files Form 2555 to claim the foreign earned income exclusion – set at $130,000 for 2025 – just to avoid being taxed twice on the same salary.
- Some countries make it difficult, or even impossible, to hold more than one nationality. This can force residents to choose between two legal identities. A US–Singaporean dual national, for example, faces mandatory National Service and Singapore’s restriction on dual citizenship after turning 21, while a US–Japanese citizen must select one nationality by age 22.
- Beyond practical concerns, some people feel that giving up citizenship aligns better with their values, lifestyle, or long-term plans. The names of new expatriates appear quarterly in the Federal Register, reflecting the growing number of individuals taking this path. A tech entrepreneur seeking a simpler tax footprint may decide to proceed, fully aware of the $2,350 nonrefundable consular fee that comes with the process.
- Many individuals discover they hold US citizenship only when a foreign bank flags them under FATCA. These “accidental Americans” often grew up entirely abroad and feel little connection to the United States. A professional in London, for example, might learn of their citizenship only during an account review and later choose to use the IRS relief procedures for certain former citizens to bring their filings up to date before formally expatriating.
Legal facts you need to know before you renounce
Before you consider the process of renouncing your US citizenship, it helps to grasp a few legal ideas – especially the Act that ends citizenship, the intent behind it, and the way the tax code classifies you once that decision becomes official.
What is an expatriating act?
An expatriating act is a formal step defined in section 349(a) of the Immigration and Nationality Act. It includes naturalizing in another country, taking an oath of allegiance to a foreign state, serving as an officer in a foreign military, or accepting a policy-level government position abroad that requires allegiance. Each of these actions can end citizenship only if it is voluntary and carried out with the clear intention to relinquish nationality.
US courts have consistently underscored the role of intent. In Afroyim v. Rusk and Vance v. Terrazas, the Supreme Court held that citizenship cannot be taken away unless the person meant to abandon it. The government must prove both the act and the deliberate choice behind it. That is why a dual national who joins a foreign government might still retain citizenship unless they clearly intend to surrender it.
Renunciation or relinquishment, and how each ends your US citizenship
Renunciation and relinquishment both end citizenship, yet they follow different paths. Renunciation is an overt act performed before a consular officer outside the United States. It involves signing the DS-4080 Oath of Renunciation and the DS-4081 Statement of Understanding. The date of that oath becomes the legal moment of expatriation for tax purposes.
Relinquishment, on the other hand, occurs when a person has already performed a qualifying expatriating act in the past – such as obtaining another citizenship or taking a foreign oath of allegiance – with the intent to give up US nationality. Instead of returning to take the oath again, they later request that the State Department recognize that earlier act and issue a Certificate of Loss of Nationality reflecting that date. This route can change how the IRS views the timing of the renunciation and how long the individual remained a citizen for tax purposes.
To better understand how these legal paths differ in practice, let’s consider two typical experiences. Sarah, who became an Australian citizen years ago and believed that decision ended her ties to the United States, yet she never took a formal oath at a consulate. She can now request that the State Department recognize her earlier action as a relinquishment, supported by evidence of her intent at the time.
Robert, by contrast, has lived in London for more than a decade and recently decided that maintaining US citizenship no longer fits his life or finances. In 2025, he appears at a US embassy to take the official oath of renunciation.
Their experiences show how one path depends on documenting a past act, while the other creates an immediate and definitive break – each with its own implications for timing and paperwork reflected in the comparison that follows.
| Feature | Renunciation | Relinquishment |
|---|---|---|
| How it’s done | Oath of renunciation taken in person before a consular officer using DS-4080 and DS-4081 | Prior qualifying act, such as foreign naturalization, oath, or government service performed with the intent to give up citizenship |
| Legal timing | The expatriation date is the day of the oath, which becomes the date used on Form 8854 | Expatriation date is the earlier act’s date if the State Department and IRS recognize it |
| Common reason | Desire for immediate certainty and closure | Belief that citizenship was already lost through earlier actions |
| Proof required | Current oath, fee payment, and interview at the embassy or consulate | Evidence of the earlier act and contemporaneous intent to relinquish |
Covered or non-covered expatriate: which do you fall under?
Not everyone who gives up citizenship faces the exit tax. The deciding factor lies in how much wealth a person holds, how much tax they’ve paid in recent years, and whether their filings are fully up to date. Since 2008, section 877A of the Internal Revenue Code has drawn this line by labeling certain individuals as covered expatriates. The label matters because it determines whether the IRS taxes a person on the unrealized gain in their worldwide assets as if everything were sold the day before expatriation.
The law sets three objective tests. Meeting even one of them makes a person covered.
- Net worth test: Anyone with a global net worth of 2 million dollars or more on the date of expatriation qualifies. The calculation includes homes, business interests, investments, and retirement accounts, minus liabilities. A long-term resident who owns two properties and a retirement plan worth a combined 2.3 million dollars, even with moderate income, would meet this test.
- Average tax liability test: The second test focuses on income tax history. If the average annual federal income tax for the five years before expatriation is more than $206,000 (the 2025 threshold), that person becomes covered, even with a modest balance sheet. A consultant earning well and averaging $220,000 in income tax each year would meet this condition despite having assets under 2 million.
- Compliance test: The third test concerns record-keeping. Anyone unable to certify five full years of accurate and timely filings on Form 8854 automatically becomes a covered expatriate. A missing or late return can tip the balance, meaning someone with moderate wealth and income but a gap in their filings could still fall under the exit-tax rules.
NOTE! When one or more of these apply, the IRS treats the person’s assets as though they were sold the day before expatriation. Gains above the 2025 exclusion of $890,000 are taxable. A person with 1.2 million dollars of built-in gain would see about $310,000 subject to capital-gains tax. The effect can extend to deferred compensation, pensions, and certain trusts, which face special mark-to-market or withholding rules.
| Status | Key features | Consequence |
|---|---|---|
| Non-covered expatriate | Net worth below 2 million, average tax below 206,000, and full five-year compliance | No exit tax on deemed gains; still must file final return and Form 8854 |
| Covered expatriate | Meets or exceeds any one of the three tests | Subject to mark-to-market tax and possible withholding on pensions and deferred compensation |
This classification explains why two people can make the same decision to renounce US citizenship yet face entirely different tax outcomes. A retiree with modest savings and clean filings might walk away tax-free, while a high-net-worth entrepreneur or someone who missed past returns could owe an immediate exit-tax bill running into six figures. Understanding where you stand before taking the oath can prevent costly surprises and make the entire process far more predictable.
What is an exit tax, and who must pay it
The exit tax is essentially a final reckoning on the wealth you’ve built up before leaving the American tax system. It turns years of unrealized gains into a taxable event and determines whether your profile fits the “covered expatriate” definition.
Under the deemed sale rule at the time of renunciation, every asset you own is treated as if it were sold at fair market value on the day before your citizenship officially ends. The difference between that value and your cost basis becomes taxable gain. This applies when renouncing US citizenship and is calculated under the same rules the IRS uses for capital gains.
Almost every type of asset is included – property, investments, business shares, crypto, artwork, or collectibles – unless a specific exception applies. In 2025, the first $890,000 of net gain is excluded from the mark-to-market calculation, helping many avoid an immediate tax bill on moderate appreciation. Those figures are adjusted annually for inflation and published in the IRS expatriation guidance.
When someone chooses to relinquish US citizenship but doesn’t meet the “covered expatriate” tests, the exit tax calculation stops there. Covered expatriates, however, must compute tax on any remaining unrealized gain above the exclusion. The liability is often taxed at long-term capital gains rates and may also trigger the 3.8% net investment income tax. Careful preparation can make a significant difference in minimizing the impact of the US citizenship exit tax.
Certain assets follow special treatment rules that reshape how and when tax applies:
- Deferred compensation: Qualified plans like 401(k)s are taxed when distributions occur (30% withholding), while non-qualified plans are treated as fully paid out the day before expatriation.
- Specified tax-deferred accounts: IRAs, HSAs, and 529 education savings plans are considered fully distributed immediately before expatriation.
- Trusts and PFICs: Non-grantor trusts face 30% withholding on future distributions, and passive foreign investment companies require detailed Form 8621 filings to report income and gains.
NOTE! Renouncing US citizenship brings long-term implications abroad, from banking access and FATCA reporting to future tax residency planning. Knowing exactly how the exit tax works – and preparing your documentation before the consular appointment – can prevent costly surprises later.
Step-by-step guide to renouncing US citizenship
"Renouncing US citizenship isn’t just about making the decision alone, or knowing key legal facts or even the paperwork – it’s a formal act that changes your legal and tax identity for life. Each stage, from gathering documents to receiving the Certificate of Loss of Nationality, carries its own weight and meaning." – Reid Copald, CPA / Tax consultant
Step 1: Prepare the required documents
Most people start by organizing their essentials – their US passport, proof of another citizenship, and personal identification such as a birth certificate and driver’s license. The consular forms DS-4080 and DS-4081 are crucial. These outline what it means to give up US citizenship, confirm your understanding, and ensure you’re aware that the choice is generally irreversible. Think of this as your foundation: the moment you put your intentions in writing.
Step 2: Book an appointment at the US embassy or consulate
The renunciation of US citizenship process must take place in person at a US consulate or embassy outside the United States. Appointment wait times can vary dramatically – for example, London, Toronto, and Singapore often have backlogs stretching several months, while smaller posts may offer earlier slots. Some applicants even travel to a nearby country to complete the process sooner. Early planning saves frustration later.
Step 3: The consular interview and oath
At your appointment, the consular officer walks you through the forms you’ve prepared and confirms that you’re acting voluntarily. You’ll review the DS-4080 – the Oath of Renunciation – and the DS-4081, which confirms you understand the legal consequences. The officer may ask a few calm but direct questions, such as: “Do you understand that this decision is permanent?” or “Are you renouncing for your own reasons, without pressure from anyone else?” Once the officer is satisfied, you pay the $2,350 fee, and you then sign and date the oath in the officer’s presence.
Step 4: Receive Certificate of Loss of Nationality (CLN)
After the interview, your file goes to the State Department in Washington for approval. When the review is complete, you’ll receive your Certificate of Loss of Nationality (CLN), officially recorded on Form DS-4083. Processing can take several weeks or even months, depending on volume and the embassy’s workload. The CLN date marks when you ceased being a US citizen in the eyes of the government and is often needed to update banks and local authorities.
Step 5: Notify the IRS and complete final tax filings
Once your CLN is issued, your final step is with the IRS. You’ll file your last tax return – typically a dual-status year using Form 1040 up to the day before expatriation and Form 1040-NR for any remaining income after that. Form 8854 is critical for confirming you’ve met your IRS obligations over the previous five years.
Anyone with deferred compensation or retirement plans also submits Form W-8CE within 30 days to ensure correct withholding. This final step completes the tax side of your renunciation and closes your US filing history.
Other IRS filing obligations after renunciation
Once you renounce your US citizenship, following due process, also know that the filings you thought were behind you still demand attention. You’ll need to wrap up the final return, certify your history with Form 8854, and prove your foreign bank reporting is in order, while keeping an eye on future obligations.
Final tax return and Form 8854
Your tax year splits when you renounce – so you file Form 1040 for the stretch from January 1 up to the day before expatriation, and if you earn US-source income after that point, you file Form 1040-NR for the remainder. Alongside that, you submit Form 8854 to certify that you maintained tax compliance over the past five years and to report your asset values at expatriation for the exit tax rules. Missed or late filings carry real consequences, including:
- $10,000 penalty for failing to file Form 8854 or for incomplete information under section 6039G, subject to reasonable cause;
- Failure to file a return is generally 5 percent per month up to 25 percent, with a minimum penalty after 60 days that is indexed for inflation;
- Failure to pay the penalty fee is generally 0.5 percent per month up to 25 percent, plus interest.
FBARs and compliance history
Keeping your record spotless isn’t only about income taxes. Every citizen who held accounts abroad valued at over $10,000 at any time during the year must ensure their Foreign Bank Account Reporting (FBAR) filings are current for at least the five years before expatriation. The statute of limitations on FBAR assessments runs for six years, so older accounts can still trigger review.
- Five years of FBAR compliance means every year of reporting on FinCEN Form 114 has been filed accurately and on time. It reassures both the Treasury and the IRS that no offshore income was concealed.
- Six-year enforcement window allows the government to audit or assess penalties long after the original filing year, which is why confirming full accuracy before expatriation is vital.
NOTE! Other forms, like Form 8938, may apply if your specified foreign financial assets cross thresholds. That reporting exists side by side with FBAR rules and sometimes triggers additional disclosure obligations.
Will renouncing automatically end my tax obligations?
Ending your citizenship doesn’t automatically erase tax responsibilities. Past liabilities remain until all filings and payments are complete, and Form 8854 is the key document that closes that chapter officially. Renouncing is not a free pass; missing returns or unresolved balances can still lead to IRS enforcement.
Once your final tax return and certifications are accepted, future reporting generally stops, except for income that remains connected to the United States. Social Security benefits can still be paid abroad in many countries, although payment rules vary based on local agreements and residency status.
Relief program for Accidental Americans
Relief procedures for accidental Americans offer a way forward for people who suddenly discover they’re considered US citizens and have never filed tax returns. Many only find out when their bank flags them under FATCA, or when they try to open an investment account abroad. After years of living outside the United States, unaware of any obligations, these individuals often feel overwhelmed. For some, this pathway becomes the bridge that allows them to catch up, prove good faith, and later renounce US citizenship without facing crushing penalties.
To qualify for the relief, your total net worth must be under $2M, and your total US tax liability for the year you give up citizenship plus the five prior years must not exceed $25,000. Everything hinges on proving that any failure to file was non-willful – an honest oversight, not avoidance.
Once eligibility is confirmed, the steps to use these relief procedures are quite structured but manageable:
- Check every requirement carefully – you must have relinquished after March 18, 2010, stay under the financial limits, and show your previous non-filing was unintentional.
- Gather documents such as your Certificate of Loss of Nationality (CLN, Form DS-4083) to confirm that you’ve officially given up citizenship.
- Prepare six years of complete US tax returns, including the year you expatriated and the five before it, along with all information forms and FBARs, adding a clear statement that you’re using the relief procedures.
- Complete Form 8854 to certify five years of compliance, and send it with your final return.
- Mail the full package to the IRS address for this program – no tax payment, penalty, or interest applies when you qualify.
- If you never had an SSN, simply leave that field blank and wait for the IRS acknowledgment once your filing is reviewed.
While this program can clear the way for compliance, it isn’t open-ended. Failing any one condition means the IRS treats the case under standard expatriation rules, which may involve exit tax, penalties, or interest. The agency can also end the program at any time with public notice, so acting while it’s available matters.
How much does it cost to renounce my US citizenship
Giving up citizenship is more than just signing papers at a consulate. It comes with real financial steps that often surprise people once they start adding everything up. To make it easy to see the full picture, all expenses connected to the process are gathered here in one place – even those mentioned earlier – so nothing gets overlooked.
NOTE! That fixed 2,350 government fee is just the foundation – every other figure depends on how much travel, tax work, or valuation support is required.
| Cost item | Typical range (USD) | What this usually includes |
|---|---|---|
| Consular government fee | 2,350 | This fixed, non-refundable charge covers the administrative process and issuance of your Certificate of Loss of Nationality. It applies even if your renunciation is later withdrawn or denied. |
| Travel & logistics | 100–2,000 | Flights, hotels, and transport for one or two embassy appointments. |
| Courier & postage | 20–100 | Embassies often require secure return shipping of passports and paperwork. A trackable DHL or FedEx envelope adds another small but unavoidable expense. |
| Notary or certified translation | 150 | Certified copies or translations of birth certificates, marriage records, or proof of another nationality are sometimes requested. |
| Professional advice & consulting | 500–3,000 | Legal or financial counsel helps with timing, forms, and cross-border implications. A person with stock options or a family trust typically lands toward the higher end of this range. |
| Final tax return and Form 8854 | 600–6,000 | Covers the dual-status filing for the year of expatriation and the compliance statement confirming five years of tax filings. |
| Deferred compensation & retirement plans | 150–750 | Includes coordination with plan administrators and W-8CE notices required for pensions or deferred comp. |
| Asset valuation or appraisal | 300–1,000+ each | Appraisers may be needed to determine the fair-market value of property or a privately held business. |
| Banking & FATCA updates | 300 | After you receive your Certificate of Loss of Nationality, foreign banks often ask for it to update FATCA records and confirm your new non-US status. |
In simple terms, a person with straightforward finances might spend 2,600 to 4,500 in total. A professional with moderate investments could see costs closer to 5,700 to 11,300, while complex portfolios, trusts, or multiple properties can easily reach 9,000 to 22,000 or more.
What happens after you renounce your US citizenship
Walking away from your American citizenship reshapes one’s daily life in surprising ways. Travel plans, retirement income, your children’s status, and even simple things like opening a bank account start to follow new rules. Understanding what changes – and what stays the same – makes settling into your new life abroad far easier.
Will you need a visa or ESTA to enter the US?
You can no longer travel on a US passport, so entering the country requires a visa appropriate to your trip’s purpose. In some cases, nationals of Visa Waiver countries may use ESTA for short stays – say 90 days for tourism – but eligibility is stricter now. Your ability to visit the US depends on the visa type you qualify for, which may hinge on prior immigration or renunciation history.
Can you still receive Social Security and retirement income?
Yes, Social Security benefits often continue abroad if your new country allows payments from SSA, and many ex-citizens still qualify under bilateral agreements. Income from IRAs, 401(k) plans, and pensions will be treated as US-source income, subject to foreign withholding of up to 30 percent if treaty relief isn’t claimed. Living in another foreign country may affect which tax treaties apply and whether you get favorable withholding rates.
What’s the impact on your children’s citizenship?
After renunciation, you won’t pass US citizenship to children born later, so those kids automatically lack that status. Any children already recognized as US citizens retain citizenship unless they renounce later. If their other parent is a citizen of another country, they may qualify under that parent’s citizenship rules.
How do banking, estate planning, and taxes work abroad?
Once you hold a CLN, banking abroad institutions may recertify you as a nonresident, updating accounts under FATCA rules. For estate planning, noncitizens face the US estate tax on US-situated assets, with a lower threshold of only USD 60,000 before Form 706-NA filing. While there’s no federal inheritance tax, some countries tax heirs locally, so coordination with your residence’s rules is essential.
Real-life stories of Americans who renounced their citizenship
Every renunciation story looks different, depending on income, assets, and compliance history. These stories highlight how the rules we’ve discussed play out in practice – from a straightforward exit to a complex case with planning and relief considerations.
- Do you relate more to Maria, the engineer in Germany who stayed compliant, kept her finances organized, and walked away from citizenship with no exit tax? Her five-year record and moderate assets – around 900,000 USD – meant she avoided covered expatriate status. After filing her final Form 1040 and Form 8854, she received her Certificate of Loss of Nationality within months, marking a clean and stress-free transition.
- Or perhaps your story feels closer to David, the Singapore-based business owner who crossed the covered expatriate thresholds with 3 million USD in assets and an average annual tax bill of 250,000 USD. Through early planning, he valued his company shares, applied the 890,000 USD exclusion, paid exit tax on the remaining gains, and adjusted his retirement plans to limit future double taxation.
- And then there’s Sophie, the accidental American from Canada who never lived or worked in the United States but discovered her unexpected citizenship years later. Using the IRS Relief Procedures for Certain Former Citizens, she caught up on five years of filings, renounced without penalties, and moved forward free from surprise liabilities.
Whichever situation sounds most like yours – or even if your path looks entirely different – remember this: the rules may seem complex, but you don’t have to face them alone. Taxes for Expats can guide you step by step, helping you understand the process, manage the filings, so you can take confident control of your next chapter.
How TFX can help you renounce safely and smartly
Renouncing citizenship involves more than just signing papers – it’s about protecting your finances, avoiding costly mistakes, and meeting every legal requirement with confidence. With over 20 years of experience and more than 50,000 clients served worldwide, Taxes for Expats provides real human expertise, not automated or DIY shortcuts.
Our team guides you through each step of the process, from final filings to exit tax calculations, ensuring your transition is smooth, compliant, and stress-free.
FAQ
Timelines vary by embassy or consulate; many posts advise several weeks to a few months from oath to Certificate of Loss of Nationality, with some quoting about 3–6 months.
No, renunciation is a serious and largely irrevocable act that becomes effective as of the oath date once approved by the Department of State under 22 C.F.R. 50.51. S.
Banks often ask for your CLN and update your status under FATCA; once you’re documented as a non-US person, institutions apply their due diligence rules and any local reporting obligations.
Loss of nationality becomes final when the State Department approves your CLN, with the effective date tied to the expatriating act.
Generally, no, Social Security benefits can continue abroad if the country and eligibility rules are met, though some restrictions apply, and the SSA Payments Abroad tool confirms what’s payable.
Plan on an in-person oath with a consular officer and a packet that typically includes DS-4079, DS-4080, and DS-4081, plus your valid passport and proof of another nationality.
You’ll file a final US return for the part-year through the day before expatriation and submit Form 8854 to certify five-year compliance; covered expatriates may owe exit tax, and later US-source income can require a 1040-NR.
