Renouncing US Citizenship: The Process, the Cost, and the Tax Bill

Renouncing US citizenship is a formal, irrevocable legal act — not just moving abroad and letting your passport expire. The process involves a consular appointment, an oath, significant paperwork, and a tax reckoning that can run into six figures depending on your net worth. Most people who look into it are surprised by how bureaucratic it is, and even more surprised by how permanent.

Here's what actually happens, and what it costs.

The Consulate Process

You can only renounce US citizenship at a US embassy or consulate outside the United States — it cannot be done on US soil. The process has four main steps:

1. Schedule a renunciation appointment. Most consulates require you to contact them directly. Wait times vary enormously by location: some consulates in smaller cities can schedule within a few weeks, while high-demand posts (London, Toronto, Frankfurt) have historically had waits of six months to a year. The process starts here, not with any IRS form.

2. Complete Form DS-4079. This is the questionnaire about your intent to relinquish citizenship. The consular officer reviews it to confirm you understand the consequences of what you're doing and are acting voluntarily.

3. Appear in person and take the oath. You formally renounce before a consular officer, sign Form DS-4083 (Certificate of Loss of Nationality), and take the oath of renunciation. This is the moment citizenship ends legally, though the paperwork takes longer.

4. Receive the Certificate of Loss of Nationality. The State Department processes the CLN after the consulate forwards the paperwork. This certificate is your proof of expatriation for tax purposes — you'll need it when you file your final US return.

The Reed Amendment, a provision that theoretically allows the US to bar entry to people who renounced to avoid taxes, has been virtually unenforced since it was passed. People who renounce are not, in practice, banned from visiting the US.

What It Costs

The renunciation fee is being reduced from $2,350 to $450, effective April 13, 2026. This has been the most complained-about aspect of the process for years — the US charges the highest renunciation fee in the world by a wide margin. The reduction removes a meaningful upfront barrier.

The tax cost is a separate matter. The fee pays for the consular appointment. The exit tax — if it applies — is calculated by the IRS and can be orders of magnitude larger.

Whether you owe exit tax depends on whether you qualify as a covered expatriate:

• Net worth over $2 million at expatriation, OR
• Average annual net income tax over $211,000 for the five years before expatriation (2026 threshold), OR
• Unable to certify five years of full tax compliance

If you're covered, the IRS treats your worldwide assets as if you sold them the day before expatriation. Gains above a $910,000 exemption (2026) are taxed at capital gains rates. Retirement accounts (IRAs, 401(k)s) are treated as fully distributed at ordinary income rates — not subject to the exemption.

If you're not covered, there's no exit tax. The compliance certification requirement is the sleeper here: someone who missed one FBAR filing or forgot to report a foreign account years ago may fail the compliance test even with a modest portfolio.

Form 8854: The Filing You Cannot Skip

The exit tax is reported on Form 8854, filed with your final Form 1040 for the year of expatriation. Every person who renounces must file it — not just covered expatriates. The form certifies your compliance history and triggers any exit tax owed.

Failing to file Form 8854 has automatic consequences: you're treated as a covered expatriate by default, regardless of net worth. There's also a $10,000 penalty. This is not a filing you can forget.

Your final return covers income through the date of expatriation. After that date, if you have US-source income (rental income from a US property, dividends from US companies), you file as a non-resident alien under different rules.

Long-Term Permanent Residents

Renouncing citizenship isn't the only route to expatriation. Long-term permanent residents — green card holders who have held a green card in at least 8 of the 15 years ending with the year of expatriation — go through a parallel process.

They file Form I-407 to formally abandon their green card and are subject to the same covered expatriate rules and Form 8854 requirement as citizenship renouncers. The tax treatment is identical.

Green card holders who simply let their card expire without filing Form I-407 remain US tax residents in the IRS's view. The IRS does not consider a lapsed green card as expatriation — only the formal filing does.

Planning Before You Renounce

The covered expatriate threshold is measured at the moment of expatriation. If you're close to the $2 million line, timing matters. If your portfolio fluctuates with markets, renouncing during a drawdown could push you below the threshold.

For retirement accounts, consider Roth conversions before expatriation. IRA balances treated as fully distributed under Section 877A are taxed at ordinary rates. Converting to a Roth before expatriation means the account has already been taxed — the 877A distribution rule doesn't apply to Roth accounts.

The bigger complexity arises when you're moving to a country with its own departure tax. Canada deems a disposition of assets when you become non-resident. Australia has its own CGT event on departure. If you renounce US citizenship after establishing residency in one of these countries, you can face taxes from both sides on the same unrealized gains — from the US exit tax and from the destination country's own regime.

The Exit Tax Playbook covers how to sequence these events to avoid the double-taxation trap, and includes country-specific checklists for the most common destination countries. Get the complete guide.

What Renouncing Actually Solves

After renouncing, you are no longer subject to US worldwide income taxation. You don't file US returns anymore (unless you have US-source income). You don't need to report foreign financial accounts. You're not subject to estate tax on worldwide assets — only on US-situs property.

For people who've spent decades filing dual-country returns, paying for international tax accountants, and managing FBAR and FATCA compliance, the administrative relief alone can be significant. The question is whether the exit tax — if any — is worth the cost of getting there.