The political environment in the United States is changing, and many individuals share concerns about their future. These concerns include some disagreements with the policies’ possible directions, including immigration, climate change, abortion, or LGBTQ+ rights. Tax obligations are among the concerns raised. Also, there are US citizens who aspire to move abroad or have a nomadic lifestyle but have questions regarding renouncing their US citizenship.
According to a survey conducted by Greenback Expat Tax Services, about one-third of American expats plan to renounce their citizenship or are 鈥渃onsidering it seriously.” Here, we go further and try to understand the new question and the new trend of Americans renouncing their citizenship. We will focus on the financial and emotional burdens that motivate this decision.
A Steep Price Tag for Expatriates
Besides all the benefits and the look for peace, Americans face a surprising penalty when they choose to renounce. They may face hefty tax bills from the US government no matter where their income comes from. The reason is that the US is among the few countries that tax its citizens based on citizenship alone. Therefore, having a second residency may solve the tax duplications, depending on the destination country you choose to move to.
Accidental Americans and the Tax Burden
The term 鈥渁ccidental Americans鈥� refers to the ones who are US citizens and are born abroad. However, these individuals have American parents or those who acquired citizenship through marriage but never lived in the US. In these cases, they have a difficult choice whether to pay high taxes on foreign income to the US government or to renounce US citizenship.
The Renunciation Process: Expensive and Complex
It is a costly and bureaucratic process to give up US citizenship. The fee of renouncing your US citizenship cost $2,350 recently, prompting a lawsuit by Accidental Americans Association.
A third of Americans living abroad have considered renouncing their citizenship. However, the number of people who actually renounced citizenship last year was lower than the year before. Although the State Department promised to significantly reduce the fee for renouncing citizenship, this has not come to life yet. Still, many Americans who are willing to renounce their citizenship are waiting for the fee reduction to take effect, often for tax reasons.
Beyond Taxes: Social and Political Factors
As we have explored above, the tax burden is a major driver of Americans renouncing their citizenship. However, some other factors contribute to the rise in renunciations. A growing social and political divide in the US is one of these factors for some Americans. It is followed by concerns around safety, the fear of gun violence, or sharing some values with foreign countries.
Historical Parallels
The topic of Americans renouncing citizenship is not new and during times of social unrest, such as the Vietnam War and the World War II, it was also populer among Americans back then.
Consequences of Renunciation
Renouncing US citizenship can offer tax relief. Yet, it also comes with significant downsides. Re-entering the US may cause some difficulties. Or else, you can lose certain benefits and have the potential possibility of being deported by your new country without a second citizenship.
A Look Ahead
To summarize, we can figure out that there are some advantages and consequences of renouncing US citizenship. It all depends on the individual鈥檚 own life of choice and motivations.
What else can US citizens do with concerns about the upcoming elections, safety, and social consent in their country? Many Americans prefer making a plan B by investing in a European country where they have residency and an option to get out of the US if they desire one day. Mostly, families get residencies for the whole family and have a more secure future plan.
Explore Our Report 鈥淕reat American Exodus鈥�
We have been researching the question of 鈥淲hy are Americans relocating and having second passports?鈥� In our report, 鈥�The Great American Exodus,鈥� we discovered that economic and political situations are effective when making a decision to relocate.