How to Expatriate from the United States
Tired of paying unto Caesar? Here’s everything you need to know to expatriate from the United States. Get the IRS out of your pocket forever by following these procedures on how to expatriate from the United States.
Before we get to how to expatriate from the United States, remember that you must have a second passport in hand before turning in your US travel document.
While this seems obvious, about 50% of the calls I get to expatriate don’t have a second passport. It’s impossible to give up your US citizenship and become “stateless.”
If you want to buy a second passport, you can get one from Dominica for about $120,000. If you prefer an investment, you can invest $500,000 to $550,000 in St. Lucia government bonds, and pay $50,000 in fees.
If you want to prepare an exit strategy, and have a few years, you can earn citizenship by becoming a resident of a foreign country. For example, if you’re from a top 50 country (such as the United States), you can invest $20,000 in Panama’s green initiative and receive legal residency. You can apply for citizenship and a passport after 5 years of residency.
As with all bureaucratic procedures, there are strenuous rules to expatriate from the United States. There are quite a few people looking to jump the sinking ship that has become the US, with radical tax laws such as FATCA since 2014, America is starting to feel like the Titanic.
Americans, although politically divided, are starting to miss the good old days when the biggest white house scandal was having two consenting adults alone in the oval office. Many U.S. Citizens aren’t satisfied with the American dream (which is becoming the American nightmare), and lately find themselves trying to resolve every predicament government installs.
expatriate from the United States, seems like a drastic solution to the worldwide tax problem, because it is.The IRS wishes to partake in all aspects of your life and death. And, even if you want to break ties, they feel entitled to alimony.
1,313 Americans turned in their passports this quarter. The total for calendar 2016 was 5,411, up 26% from 2015, when the total was 4,279 published expatriates. The 2015 total was 58% more than 2014. It looks like 2017 will be about 30% higher than 2016.
Once you decide on this last resort, the final solution, you may have to pay an “exit tax”. This tax is a full tax applied the calculated to the sum of all your hard work and investments made (such as capital gains), even if you aren’t selling. The IRS just wants to say goodbye the only way the know how.
Here’s a checklist to expatriate from the United States:
- Have a second passport
- Have a foreign bank account
- Get your properties in order
- Full employment in foreign soil or have substantial income
If you want to expatriate from the United States, you will settle accounts with the IRS, hand over your passport and leave, but in most cases it’s never that simple. Also keep in mind that the next time you visit the U.S., you may need a visa (which in some cases, isn’t granted).
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In 2014, the State Department raised its fee for this process from $450 to $2,350, claiming the previous price didn’t fully capture the costs involved. The IRS noticed with new regs the number of citizens renouncing their citizenship more than tripled from the previous few reporting periods. Considering that the exit tax came about in 2008, this increase implies that the value of a relinquishing a US passport is increasing as the IRS becomes more and more aggressive.
So, you’re ready to expatriate from the United States. Here’s what you need to know:
To begin, information provided below is accurate for all people looking to expatriate on or after June 17, 2008. If you are US citizen, reading this now, then obviously applies to you. On or after date stated above you expatriated, then you are special because you have a different method of taxation.
Only “covered expatriates” must pay an exit tax. A covered expatriate is defined as follows by the IRS:
If your net worth is over $2 million. If you don’t know your net worth, then it’s probably under $2 million. Your net worth is the sum of all net (or tax free) values you own; worldwide assets subtracting debt (ex. [Homes + Business Property + Cash + Car + Investments + any other Assets] – [bank loans + student loans + any other liabilities] = Net Worth). If married it’s calculated separately. You can send your spouse up to $149,000 to escape US gift tax and exit tax, if your spouse if not a US citizen, lowering your net worth.
Your average annual net income tax for the 5 years before the date termination of residency is more than a specified amount that is adjusted for inflation ($151,000 for 2012, $155,000 for 2013, $157,000 for 2014, and $160,000 for 2015).
You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency.
There are a few ways to avoid being a covered expatriate. For example,
- If at birth you had dual citizenship, and lived as a resident of the foreign country, and you have not been a resident of the U.S. for tax purposes for more than 10 of the 15 years ending with the year of expatriation;
- or you were under age 18 ½ on the date of expatriation, and you had been a resident of the U.S. for tax purposes for not more than 10 years before your date of expatriation,
- Or a green card holder with less than 8 years in the US,
then you are not a covered person.
If you’re a covered expat, you will pay the exit tax on all capital gains. You don’t need to sell your assets, you just need to pay a capital gains tax as if you sold them.
No, you can’t give away your assets to avoid the expat tax. If you wish to give any of your US assets to anyone at or after the expatriation, you will pay gift or estate tax.
After expatriation you may be eligible for social security and medicare but each case is different.
When you relinquish said citizenship you will not have the right to come and go freely into the US. The 1996 amendment to the Immigration Nationality Act gives the US Att. General the power to deny entry of expatriates who were avoiding tax. Also keep in mind most second passports for say don’t include visa free access to the United States. Malta is one of the few exceptions.
If you’re tired of paying the IRS each year, or being treated like a pariah by your foreign bank, it may be time to expatriate from the United States. If you would like to discuss how to plan out your escape, please contact our office HERE
We can help you with a second passport or residency, a comprehensive tax strategy, and negotiate your expatriation from the United States.
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