How the exit tax actually works
Step 1 — Are you a covered expatriate? You only face the exit tax if you trigger at least one of the three tests: net worth ≥ $2M, average US tax > $211,000 (2026, Rev. Proc. 2025-32 §3.37), or failure to certify compliance on Form 8854. Careful planning aims to avoid all three.
Step 2 — The deemed sale. If covered, the IRS pretends you sold everything you own worldwide at fair market value the day before you expatriate. It adds up the gains and losses across all mark-to-market assets.
Step 3 — Apply the exclusion. The first $910,000 (2026, Rev. Proc. 2025-32 §3.38) of net gain is excluded. Only the excess is taxed, at the capital-gains rates that would normally apply.
The big trap: retirement accounts and deferred compensation skip this calculation and have their own rules. An IRA or other specified tax-deferred account is treated as fully distributed on the day before expatriation, with no early-distribution tax (§877A(e)). Eligible deferred compensation and distributions from a non-grantor trust are subject to 30% withholding when paid (§877A(d)(1), (f)).
The compliance test catches people by surprise
Plenty of people who are nowhere near $2M net worth still become covered expatriates — because they can't certify five clean years of US tax filings on Form 8854.
This hits "accidental Americans" and long-term expats who fell behind on US filing obligations (the US taxes citizens on worldwide income wherever they live). If that's you, catching up first — sometimes via the IRS Streamlined Procedures — before expatriating can be the difference between covered and non-covered status.
Filing Form 8854 itself is mandatory when you expatriate; skipping it triggers covered status and penalties.
Planning levers (talk to a professional first)
Because each test is a bright line, timing and structuring matter enormously:
- Net worth is per person — gifting to a spouse or heirs before expatriation can bring an individual below $2M (subject to gift-tax rules).
- Tax liability is a 5-year average — renouncing after lower-income years, or letting a high-tax year "fall off," can keep you under the threshold.
- Compliance — get fully current on filings and file Form 8854 correctly.
These moves have real tax and legal consequences and must be done with a cross-border professional — this tool only flags whether you're in the zone.
How to expatriate & file: steps, fees & the 8854 deadline (2026)
Expatriation is a two-track process — an immigration act (renouncing or surrendering the green card) and a tax act (the final return plus Form 8854). The tax filing, not the consular appointment, is what actually ends your US obligations.
Fees & deadlines
| Item | Amount / Deadline |
|---|---|
| State Dept. renunciation fee | $450 (22 CFR 22.1, item 8) |
| Form 8854 / Form I-407 filing fee | $0 |
| Form 8854 + final return (Americans abroad) | 15 June (year after) |
| With extension (Form 4868) | 15 October |
The renunciation fee is a State Department administrative fee and is not published in the IRS sources linked below, so we do not state an amount; there is no IRS fee for Form 8854. The real cost for covered expatriates is the exit tax itself.
Why timing the filing matters
Renunciation is irreversible once the CLN is issued, and missing the Form 8854 deadline makes you a covered expatriate automatically — even if you were under both dollar thresholds. Getting fully tax-compliant before you expatriate matters because, if you are under both dollar thresholds, that certification is what keeps you from being a covered expatriate.
Documents to prepare
- Certificate of Loss of Nationality (citizens) or Form I-407 (green card holders).
- Prior 5 years of US tax returns, FBARs and Forms 8938.
- A date-of-expatriation balance sheet of worldwide assets at fair market value.
- Records of retirement accounts and deferred compensation for separate treatment.
Frequently asked questions
Q. I'm just giving up my green card, not citizenship — does this apply?
A. If you're a "long-term resident" (green card in 8 of the last 15 years), yes — the same expatriation rules apply when you abandon the card.
Q. My average US tax is near zero thanks to the FEIE — am I safe on test 2?
A. Possibly. The test looks at actual US tax owed, which the foreign earned income exclusion and foreign tax credits can reduce to near $0 — but you can still be covered via the net worth or compliance tests.
Q. Does cash get taxed by the exit tax?
A. Cash has no built-in gain, so the deemed sale produces nothing to tax — but it still counts toward the $2M net worth test.
Q. Can I just leave and not file?
A. No. Failing to file Form 8854 makes you covered automatically and exposes you to penalties and continued US tax obligations. Expatriation is a formal tax event.
Expatriation (exit tax) checklist (save your progress)
Tick each item as you prepare it. Progress is saved in this browser — nothing is uploaded. This is a preparation aid, not tax advice.
Sources and official references: IRS — Expatriation Tax (IRC §877A); IRS — Instructions for Form 8854; 26 U.S. Code §877A; 26 U.S. Code §877(a)(2); IRS Rev. Proc. 2025-32 (2026 inflation-adjusted amounts). The $2,000,000 net-worth test is fixed by 26 U.S. Code §877(a)(2), linked above. The two annually adjusted amounts come from Rev. Proc. 2025-32: §3.37 sets the average-annual-net-income-tax test at more than $211,000 for calendar year 2026, and §3.38 reduces the mark-to-market inclusion by $910,000 for taxable years beginning in 2026. The Instructions for Form 8854 linked above are the 2025 revision and still carry the 2025 values ($890,000 exclusion, $206,000 tax test); use them for the filing mechanics, not for the 2026 figures. The renunciation fee is item 8 of the State Department's Schedule of Fees for Consular Services, 22 CFR 22.1: $450 for administrative processing of a request for a Certificate of Loss of Nationality — cut from $2,350 by the final rule of March 13, 2026 (91 FR 12296), effective April 13, 2026. If you leave the rate field empty, the estimate uses the 20% top long-term capital-gains rate of 26 U.S.C. §1(h)(1)(D); enter your own rate if part of the gain falls in the 0% or 15% bands or is short-term. This is an independent self-assessment tool, not tax or legal advice; the exit tax is highly fact-specific, especially for retirement accounts and trusts. Consult a licensed cross-border tax attorney or CPA before expatriating. See also our N-400, green card travel and SPT tools.