Overview
The United States is one of only two countries (along with Eritrea) that taxes based on citizenship rather than residence — meaning U.S. citizens and green-card holders owe U.S. filings and potentially taxes even while living abroad. To discourage the wealthy from escaping this system by giving up citizenship, the U.S. imposes an exit tax. Canada, by contrast, taxes based on residence, but levies a “departure tax” (deemed disposition) on most assets when someone becomes a non-resident.
The U.S. Exit Tax (IRC §877A)
Enacted in 2008, the exit tax applies to “covered expatriates” — people who renounce citizenship or abandon a long-term green card. You are a covered expatriate if any of the following is true:
- Your net worth is $2 million or more on the date of expatriation; or
- Your average annual net income tax liability over the previous 5 years exceeds an inflation-indexed threshold (≈$201,000 for 2024); or
- You fail to certify 5 years of U.S. tax compliance (Form 8854).
How it works
- Mark-to-market: worldwide assets are treated as sold at fair market value the day before expatriation; gains above an exemption ($890,000 in 2024) are taxed immediately.
- Special rules apply to deferred compensation, IRAs/retirement accounts, and trusts.
- Section 2801: U.S. persons receiving gifts or inheritances from covered expatriates pay a 40% tax on the amount received.
- Re-entry risk: under INA §212(a)(10)(E), the IRS can designate a tax-motivated renouncer inadmissible (banned from visiting the U.S.).
Canada’s “Departure Tax”
Canada has no citizenship-based taxation and no true exit tax. Instead, when you cease to be a tax resident, the Income Tax Act (§128.1(4)) triggers a deemed disposition: most worldwide property is treated as sold at fair market value, realizing capital gains that year.
- Exemptions include Canadian real estate (“taxable Canadian property,” still taxable when later sold) and certain registered plans/pensions.
- You can post security with the CRA to defer payment.
- After becoming a non-resident, Canada generally taxes only Canadian-source income.
Renunciation Statistics (2008–2024)
Compiled from the quarterly Federal Register lists of individuals choosing to expatriate (published under 26 U.S.C. §6039G). Recent figures are approximate — verify against the latest quarterly release.
*Preliminary/approximate. Green bars = record years.
What drives the spikes?
- FATCA (2010 law, effective 2014): forced foreign banks to report U.S. account holders, making life difficult for ordinary expats — the biggest driver of the mid-2010s surge.
- Compliance costs: routine cross-border tax preparation commonly runs $1,500–$3,000+/year, often to owe $0.
- Punitive regimes: PFIC rules effectively punish foreign mutual funds and non-U.S. retirement vehicles (e.g., Canadian TFSAs/RRSPs).
- 2019 dip / 2020 spike: largely COVID-related embassy closures and processing backlogs rather than a real decline in demand.
Notable Renunciations
| Name | Year | New Base | Note |
|---|---|---|---|
| Kenneth Dart | 1994 | Cayman Islands | Container-fortune heir; his move helped spark early exit-tax rules |
| Eduardo Saverin | 2012 | Singapore | Facebook co-founder; renounced shortly before the IPO |
| Denise Rich | 2012 | Austria | Songwriter; widely reported as tax-driven |
| Tina Turner | 2013 | Switzerland | Cited life and marriage in Europe |
| Boris Johnson | 2016 | UK (dual at birth) | Fought a U.S. capital-gains bill on his London home before renouncing |
| Roger Ver | 2014 | St. Kitts | Early Bitcoin investor; later indicted (2024) for allegedly hiding assets during expatriation — a cautionary tale |
Most renunciants are ordinary middle-class expats, not billionaires — driven by paperwork burden rather than large tax bills.
Advocacy Groups & Community Resources
- American Citizens Abroad (ACA) — americansabroad.org; leading voice for switching to residence-based taxation.
- Republicans Overseas — has sponsored residence-based-taxation bills in Congress.
- Democrats Abroad — runs an Overseas Americans Task Force on tax reform.
- SEAT (Stop Extraterritorial American Taxation) — European-focused coalition.
- Isaac Brock Society — isaacbrocksociety.ca; long-running blog/forum on expatriation experiences.
- Fix the Tax Treaty — fixthetaxtreaty.org; technical analysis of treaty gaps.
- Andrew Mitchel’s International Tax Blog — tracks each quarterly renunciation list as it’s published.
- Reddit: r/USExpatTaxes, r/expats — firsthand accounts and Q&A.
Practical Caveats
- Renunciation requires certifying 5 years of tax compliance; skipping filings can invalidate the exit and expose you to penalties or prosecution (see Roger Ver).
- Embassy appointments can take months; the $2,350 fee is non-refundable.
- Future U.S.-source income (dividends, wages, sales of U.S. property) is still subject to U.S. withholding/tax.
- If you were a covered expatriate, the IRS can bar re-entry; non-covered expatriates generally visit freely (check ESTA/visa eligibility).
- Social Security benefits accrued before expatriation may still be payable, subject to nonresident withholding and any totalization agreement.
- Gifting or bequeathing money to U.S.-person relatives later can trigger the 40% Section 2801 tax on them.