Beware the Consequences of Moving Abroad

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An ever increasing number of US Citizens are claiming that they will move outside the United States based on the outcome of the 2016 Presidential Election. From a tax standpoint this is easier said than done.

United States tax laws subject its citizens to US tax on their worldwide income, no matter where they reside. Consequently, simply moving abroad and retaining citizenship won’t absolve you from US taxation.

If you decide to give up your US citizenship, you could owe an exit tax if your average annual tax for the five years prior to expatriation exceeds $161,000 or you have at least $2 million in net worth. You’ll also be treated as disposing of all of your assets for fair market value on the day before your expatriation date and you will be taxed on the profits from the deemed sales to the extent they exceed a nearly $700,000 exemption.

Finally, those contemplating a renunciation of U.S. citizenship should understand that the act is irrevocable, except as provided in section 351 of the INA (8 U.S.C. 1483), and cannot be canceled or set aside absent successful administrative or judicial appeal. (Section 351(b) of the INA provides that an applicant who renounced his or her U.S. citizenship before the age of eighteen can have that citizenship reinstated if he or she makes that desire known to the Department of State within six months after attaining the age of eighteen. See also Title 22, Code of Federal Regulations, section 50.20).