On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad. Many US residents will see an immediate benefit on their 2018 tax returns, but for US expats and green card holders living abroad, things may have changed for the worse. Even with the latest developments impacting US expats, how do you know if renouncing your US citizenship is right for you?
Why do people renounce their US citizenship?
Renunciation is rarely a political decision, but instead, a decision made with the financial best interest of the individual in mind. The United States is the only major country in the world that taxes the income of its citizens and green card holders regardless of where they actually live. Every citizen with ties to the US, regardless of location in the world, is required to meet IRS reporting and filing obligations. Many citizens don’t end up owing US taxes after filing, but for others, double-taxation can be a costly burden.
Are you an “Accidental American” (What IS an Accidental American)?
US citizenship is often a source of pride for those born there, or lucky enough to have completed the immigration process. For others, US citizenship is received almost by accident. Children born outside the US to a US parent who lived in the US long enough, and individuals born in the US but who haven’t lived there since infancy, are US citizens regardless of where they live now. This can come as a surprise when they receive notification of tax filing obligations from a country with which they otherwise have no ties.It’s crucial to know if you have a connection to the US, understand what it means for you, and learn your options going forward.
Make sure the benefits outweigh the costs.
There are huge benefits that come with carrying US citizenship across the globe, but there are also costs. It’s imperative to ensure you’re fully informed of both so that you’re able to make the best decision right now, and for your financial future. Along with the benefits of being a US citizen, there are the costs of double taxation, US estate and gift tax, and more. Only you can decide if having US citizenship is worth it for you and your family.
Renouncing the right way.
If you choose to renounce your US citizenship, it’s important to have professional guidance in order to avoid potential pitfalls along the way, such as the US Exit Tax, or even becoming barred from the US. Before any decision is made, you need to be informed and have a resource you can count on to help you avoid any and all pitfalls.