Renouncing US Citizenship: Costs, Exit Tax, and What You Need to Know (2026)

Renunciations of US citizenship surged 102% in Q1 2025 compared to the same quarter the prior year, according to Federal Register data. For the first time since the Great Depression, more Americans are leaving the country than foreign nationals are arriving. What was once an extreme and rarely discussed option — permanently giving up your US passport — is now a topic that financial planners, expat forums, and immigration attorneys field questions about daily.

Yet most people considering this step do not fully understand the process, the costs, or the tax consequences. Renunciation is irreversible. There is no “undo” button, no cooling-off period, and no guaranteed right to re-enter the United States once your Certificate of Loss of Nationality is issued. The $2,350 fee is just the beginning — the real financial exposure lies in something called the exit tax, which can run into hundreds of thousands of dollars for high-net-worth individuals.

This guide covers the complete picture: why people renounce, what the process looks like step by step, who owes the exit tax and how much, what you lose, what you keep, and the alternatives that might achieve your goals without burning the bridge permanently.

Why People Renounce US Citizenship

The decision to renounce is almost never impulsive. Most people who reach this point have lived abroad for years and have weighed the ongoing costs of maintaining US citizenship against the diminishing benefits. Here are the most common drivers:

Worldwide taxation. The US is one of only two countries (the other being Eritrea) that taxes citizens on their global income regardless of where they live. An American in Amsterdam owes taxes to both the Netherlands and the United States. While mechanisms like the FEIE and Foreign Tax Credit can reduce double taxation, they add complexity and do not eliminate the filing burden.

FATCA and foreign banking. The Foreign Account Tax Compliance Act requires foreign financial institutions to report accounts held by US citizens to the IRS. The compliance cost is so high that many banks outside the US simply refuse American customers. Expats report being denied mortgages, investment accounts, and even basic checking accounts in their country of residence because of their US citizenship.

FBAR reporting penalties. US citizens with foreign accounts exceeding $10,000 at any point during the year must file a Report of Foreign Bank and Financial Accounts. The penalties for non-compliance are draconian — up to $10,000 per account per year for non-willful violations, and up to $100,000 or 50% of the account balance for willful violations.

Other factors. Some renounce for political or philosophical reasons. Others have acquired citizenship in their country of residence, have no plans to return to the US, and see no reason to maintain a status that costs them thousands in annual tax preparation fees. For dual citizens who have never lived in the US, the calculus is even simpler — they inherited obligations to a country they have no connection to.

The Renunciation Process Step by Step

Renouncing US citizenship is a formal legal act with a defined procedure. You cannot do it casually, and you cannot do it on American soil. Here is what the process looks like:

1. Obtain second citizenship first. You must be a citizen of another country before you renounce. The US will not allow you to make yourself stateless. If you do not already hold a second passport, you need to acquire one through naturalization, descent, or investment before starting the renunciation process. This alone can take years depending on the country. See our guide on citizenship by descent for options that may be available based on your heritage.
2. Schedule an appointment at a US embassy or consulate abroad. Renunciation must take place outside the United States, at a US diplomatic post. You cannot walk in — you must request an appointment specifically for renunciation. Wait times vary dramatically by location. Some embassies have backlogs of six months or more; others can schedule you within weeks.
3. Attend two appointments. The first appointment is where you declare your intent to renounce under oath. A consular officer will explain the consequences and confirm you understand the act is irrevocable. The second appointment (typically scheduled two weeks later) is the formal oath of renunciation. You sign DS-4080 (Oath of Renunciation) and DS-4081 (Statement of Understanding).
4. Pay the $2,350 renunciation fee. The United States charges the highest renunciation fee in the world — more than 20 times the average among developed nations. This fee was raised from $450 in 2014 and is non-refundable regardless of outcome.
5. File your final tax returns. You must file IRS Form 8854 (Initial and Annual Expatriation Statement) along with your final US tax return. This form covers the tax year up to and including your date of expatriation. If you are a “covered expatriate” (more on this below), you must also calculate and pay the exit tax. You remain liable for US taxes through your renunciation date.
6. Receive your Certificate of Loss of Nationality (CLN). After the State Department processes your case, you will receive a CLN confirming that you are no longer a US citizen. This is the document that makes it official. Processing times range from a few weeks to several months depending on current backlogs.

Timeline: From first appointment request to CLN in hand, expect 3 to 12 months depending on embassy backlog, State Department processing times, and the complexity of your tax situation. Some cases have taken over a year.

Exit Tax: Who Owes It and How Much

The exit tax is the financial mechanism that prevents wealthy Americans from renouncing solely to avoid taxes. It applies only to “covered expatriates” — those who meet any one of three tests. If you are not a covered expatriate, you owe no exit tax.

If you trigger any one of these tests, you are a covered expatriate. The exit tax then works through a mark-to-market regime: all of your worldwide assets are treated as if they were sold at fair market value on the day before your expatriation date. Any unrealized gains above the exclusion amount are taxed as if you had actually sold.

For 2026, the exclusion amount is $910,000. That means the first $910,000 of unrealized gains are exempt. Only gains above that threshold are subject to tax. For example, if you have $3 million in unrealized capital gains, you would owe exit tax on $2,090,000 ($3M minus $910K). At the current long-term capital gains rate, that could be a tax bill of $400,000 or more.

Certain assets get special treatment. Deferred compensation plans (including 401k and traditional IRA balances) are subject to a 30% withholding on distributions rather than the mark-to-market rule. Interests in non-grantor trusts are taxed when distributions are received.

The good news: most Americans who renounce are not covered expatriates. If your net worth is under $2 million, your average annual tax liability over the past five years is under $211,000, and you have been filing your taxes properly, you owe no exit tax at all. You still need to file Form 8854 to certify your compliance, but the financial impact is limited to the $2,350 fee and final-year tax preparation costs.

What You Lose When You Renounce

Renunciation is permanent. Here is what you give up:

Right to live and work in the US. Without citizenship, you need a visa to enter the United States and a work authorization to be employed there. You become subject to the same immigration system as any other foreign national. There is no special “former citizen” visa category.

Voting rights. You permanently lose the right to vote in any US election — federal, state, or local.

Consular protection. If you run into trouble abroad, the US embassy will not help you. You are the responsibility of your new country of citizenship.

Easy entry to the US. Depending on your new citizenship, you may need an ESTA, a B-1/B-2 visa, or another travel authorization to visit. Processing times and restrictions apply. Some former citizens report additional screening at US borders.

Medicare eligibility. You lose access to Medicare. If you have paid into the system for decades, those contributions are gone. You cannot enroll in Medicare Parts A, B, or D as a non-citizen living abroad.

Social Security (partial). This one is more nuanced. If you have earned 40 qualifying quarters (approximately 10 years of work), you can generally still collect Social Security benefits as a former citizen. However, depending on your new country of residence and whether a totalization agreement is in place, the US may withhold 30% of your benefits. Some countries have agreements that reduce or eliminate this withholding. It is essential to check the specific treaty between the US and your new country.

The Reed Amendment. Section 212(a)(10)(E) of the Immigration and Nationality Act theoretically allows the US to deny entry to former citizens who renounced for tax avoidance purposes. In practice, this provision has never been enforced — not once since it was enacted in 1996. But it remains on the books, and there is no guarantee it will stay dormant forever.

What You Keep After Renouncing

Not everything disappears when you give up your passport:

Social Security benefits. As noted above, if you have 40 qualifying quarters, you can generally continue receiving benefits. The US has totalization agreements with over 30 countries that coordinate Social Security credits and reduce or eliminate withholding. Check whether your new country of residence is covered.

Private pensions, 401k, and IRA accounts. These remain yours. You can continue to hold them and receive distributions. However, distributions will be subject to US tax withholding (typically 30% unless reduced by a tax treaty). You cannot make new contributions after expatriation.

US real estate. Non-citizens can own property in the United States. Your home, rental properties, or land holdings are unaffected by renunciation. You will owe US taxes on any rental income or capital gains from the sale of US real property under FIRPTA (Foreign Investment in Real Property Tax Act).

US bank accounts. In theory, you can maintain US bank accounts as a non-citizen. In practice, some banks close accounts when they learn a customer has renounced. Others impose restrictions or require updated documentation. It is worth having a conversation with your bank before renouncing to understand their policy.

Veterans benefits. In most cases, VA benefits (disability compensation, pension, education benefits) continue after renunciation. There are some restrictions on receiving benefits while residing in certain countries, but renunciation itself does not automatically disqualify you.

Alternatives to Full Renunciation

Before taking an irreversible step, consider whether a less drastic approach achieves the same goals:

Relinquishment. Technically distinct from renunciation, relinquishment occurs when you voluntarily acquire citizenship of another country with the intent to lose your US nationality. Historically, this was free (no $2,350 fee). In practice, the State Department now rarely accepts relinquishment claims and requires extensive evidence of intent. Most applicants are directed to the formal renunciation process instead.

FEIE + Foreign Tax Credit. The Foreign Earned Income Exclusion can shelter up to $126,500 of earned income from US tax. Combined with the Foreign Tax Credit for taxes paid to your country of residence, many expats reduce their US tax liability to zero or near-zero. The filing burden remains, but the financial pain is manageable.

Living in a tax treaty country. The US has income tax treaties with over 60 countries that provide relief from double taxation, reduced withholding rates, and tie-breaker rules for tax residency disputes. Choosing a residence country with a strong US treaty can significantly reduce your tax complexity. Our tax comparison tool helps you evaluate destinations by their tax treatment.

Streamlined filing for delinquent expats. If you have fallen behind on US tax filings, the IRS Streamlined Filing Compliance Procedures allow you to come into compliance without penalties — as long as your failure to file was non-willful. This program requires filing three years of back tax returns and six years of FBARs. It is a lifeline for the many Americans abroad who did not know they had filing obligations.

Before You Decide

Renouncing US citizenship is one of the few truly irreversible life decisions. Before committing, exhaust every alternative. Work with an expat tax specialist to model your actual tax burden under the FEIE and FTC — you may find it is far less than you assumed. Talk to an immigration attorney about your specific situation, especially if you are close to the covered expatriate thresholds.

If you are in the early stages of thinking about leaving the US, our comprehensive guide to leaving the US covers the full spectrum of options from temporary moves to permanent relocation. Use the tax comparison tool to see how different countries stack up on tax treatment, and compare countries side-by-side to find the destination that fits your priorities. The right country with the right tax strategy can solve many of the problems that drive people toward renunciation — without closing the door forever.