How to renounce American citizenship: A comprehensive guide

You may have wondered, can a US citizenship be revoked? The answer is yes, under certain circumstances, here are three very different instances: 
Here are three examples:

• Voluntary renunciation to avoid US tax obligations.
• Failing to file US tax returns for an extended period while living abroad.
• Engaging in willful tax evasion or fraud as determined by the IRS.

Hopefully, the second and third points don’t apply to you, but you should have a clear understanding of how to renounce American citizenship and the repercussions, as this complex process requires careful consideration of legal, financial, and personal implications.

Renunciation is a serious decision, regardless of whether it’s driven by tax obligations, dual citizenship restrictions, or personal circumstances.

With constantly shifting political landscapes, monetary policies, the revolving door of Washington, and a new administration coming in, you need tax professionals you can trust. We understand the complexities involved. Here, we will provide you with comprehensive guidance through each step of this significant life decision.

What does it mean to renounce US citizenship?

Renouncing US citizenship is the formal process of voluntarily giving up your rights and responsibilities as an American citizen. 

This irrevocable action means permanently surrendering all privileges of US citizenship, including the right to live and work in the United States, protection by US consular services, and the ability to pass citizenship to children born after renunciation.

The decision has major repercussions beyond the obvious political and social considerations. It affects your ability to work with US-based clients, manage US-based investments, and maintain certain business relationships. Unlike temporary residency changes or long-term foreign stays, renunciation is permanent and cannot be reversed under any circumstances.

Green Card holders take note

While this guide focuses on citizenship renunciation, permanent residents should understand that surrendering a Green Card involves a different process. Green Card holders should note two key differences when surrendering their status:

1. The process involves submitting Form I-407 rather than renouncing it at a consulate.
2. There’s no fee for relinquishing a Green Card, unlike the $2,350 fee for citizenship renunciation.

How much does it cost to renounce your US citizenship?

The cost to renounce American citizenship involves several expenses, with the State Department fee being the most significant at $2,350. This fee, among the highest globally for citizenship renunciation, is non-refundable regardless of whether you complete the process or your application is denied.

Additional costs may include:

• legal consultation fees, which typically range from $2,000 to $7,000
• tax preparation expenses for final returns and exit tax calculations
• document translation and certification costs, varying by country
• travel expenses to US embassies or consulates
• professional financial planning services to restructure investments

Keep in mind that these costs can mount up quickly, often exceeding $10,000+, depending on the complexity of your financial situation and the need for professional assistance.

Step-by-step process to renounce US citizenship

Before renouncing your US citizenship, ensure that you have a valid second citizenship. Becoming stateless is not permitted under international law, and you will need to provide proof of another citizenship to complete the renunciation process. Make sure all your documentation, including passports and naturalization papers, is current and valid.
Scheduling an appointment

• Renunciation appointments can only be made at US embassies or consulates located outside the United States.
• Be prepared for lengthy waiting periods; appointments may be booked out 3–6 months in advance.
• Some locations may require multiple visits to complete the entire process.

Gather all the necessary documents before your appointment:

• valid US and foreign passports
• birth certificate and naturalization documents, if applicable
• recent tax returns (typically the past five years); see IRS Form 8854
• Social Security card
• proof of residence in your new country
• evidence of foreign citizenship
• any required translations of documents

During your appointment, the renunciation interview, you will:

1. Sign Form DS-4079 (Request for Determination of Possible Loss of Citizenship).
2. Complete Form DS-4081 (Statement of Understanding).
3. Take the oath of renunciation.
4. Pay applicable fees, currently $2,350.
5. Answer questions about your decision and understanding of the consequences.

After the appointment, processing typically takes several months. Once complete, you will receive a Certificate of Loss of Nationality. 

NOTE! Keep copies of this document for your records and notify relevant financial institutions and government agencies of your change in citizenship status. It is important to carefully consider all the implications before proceeding and to seek professional advice as needed.

Tax obligations when renouncing US citizenship

Final US tax return

Your tax obligations don't end immediately upon renunciation. You must file a final tax return for the partial year up to your renunciation date. 

Two common mistakes when addressing tax obligations during US citizenship renunciation include:

• Failing to certify five years of tax compliance on Form 8854: This oversight can result in being classified as a “covered expatriate,” leading to potential exit taxes and penalties.
• Submitting incomplete or incorrect Form 8854: Missing required details, such as changes in assets or liabilities over the five-year period, can lead to penalties up to $10,000 and continued tax obligations until the form is properly filed.

This final filing is crucial, as mistakes or omissions can result in significant penalties and complications with your renunciation process.

The IRS requires you to declare and pay tax on any income earned until the date of your renunciation. This includes worldwide income, capital gains, and any other taxable earnings. Working with experienced expat tax return professionals can help ensure you don't overlook any reporting requirements during this critical period.

Renouncing US Citizenship Exit Tax

When renouncing US citizenship, the exit tax treats your assets as if they were sold on the day before your expatriation date, with gains over the threshold being taxable. 

This includes unrealized gains on everything from real estate to pension plans and stock options. Long-term residents surrendering their Green Cards may also be subject to these provisions if they meet the criteria for a covered expatriate.

The US exit tax applies to “covered expatriates” who renounce US citizenship or long-term permanent residency. You are a covered expatriate if you meet any of the following criteria:

• Net worth: $2 million or more on the expatriation date.
• Tax liability: Average annual net income tax liability exceeds $201,000 (2024 threshold, adjusted annually).
• Tax compliance: Failure to certify compliance with US tax obligations for the past five years.

Potential challenges after renunciation

After renouncing citizenship, you'll face several significant changes. Visa-free access to the US ends, requiring you to obtain appropriate visas for visits. Your Social Security benefits may be affected, and managing US retirement accounts becomes more complex. 

Additionally, certain circumstances may restrict your ability to re-enter the US, particularly if authorities believe you were renounced for tax purposes.

Future inheritance matters can also become complicated, as you'll be treated as a non-US person for estate tax purposes. This may affect your ability to receive gifts or inheritances from US persons without tax implications. Banking relationships with US institutions might require restructuring, and some financial services may become limited or unavailable.

Is renunciation the right choice for you?

Before deciding to renounce citizenship taxes and obligations, carefully evaluate your long-term plans. Consider your family ties, business interests, and future travel needs. This permanent decision affects not only you but potentially your children and future generations. The financial implications extend beyond immediate tax consequences to include inheritance planning, retirement strategies, and investments.

Many who consider renunciation find that alternative solutions, such as streamlined filing procedures, might better address their concerns. Consulting with immigration lawyers and tax specialists can help clarify the implications for your specific situation and explore all available options before making this irreversible decision.