Renouncing US citizenship: exit tax, Form 8854 and the tests

What this covers

Renunciation is a formal act of giving up US nationality under section 349(a)(5) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)). The expatriation tax is a separate set of tax rules in sections 877 and 877A of the Internal Revenue Code. The IRS says these rules apply to US citizens who have renounced citizenship and to long-term residents who have ended their US resident status. Not everyone who renounces owes an exit tax, but everyone who expatriates has a Form 8854 filing duty.

See how renunciation works at a US embassy or consulate

The statute says a US national loses nationality by voluntarily making a formal renunciation before a US diplomatic or consular officer in a foreign state, with the intention of giving up US nationality, in the form the Secretary of State prescribes. Renouncing while inside the United States falls under a different provision, and the State Department form says those questions go to US Citizenship and Immigration Services.

The State Department questionnaire for a Certificate of Loss of Nationality (Form DS-4079, May 2025 edition) sets out the steps. You complete the questionnaire without signing it, send it to the embassy or consulate, and attend an initial interview, which may be in person, by telephone or by email. You then attend an in-person interview before a US diplomatic or consular officer abroad, where you sign the attestations and take the oath. The officer forwards the file and a recommendation to the Department, which approves or denies the request.

There is a processing fee. The form says the fee is not refunded solely because the Department denies a request. Check the current consular fee schedule for the amount before you book an appointment. The United States country record covers the wider tax system you are leaving.

Read what you are asked to confirm before you sign

Part II-A of Form DS-4079 is a statement of understanding signed under oath. Reading it before the appointment shows the consequences the State Department wants applicants to accept.

• An approved certificate is a final agency determination of loss of US nationality, and the form calls the determination serious and irrevocable.
• After approval you are an alien for US entry purposes and must follow the rules for entering and staying in the United States.
• A person with no other nationality may become stateless.
• Loss of nationality may not relieve you of any US income tax or other tax obligations, and the form tells you to contact the IRS about them.
• If the Department of Homeland Security determines that you renounced for tax avoidance purposes, you may be ineligible for a US visa and for admission under INA section 212(a)(10)(E).
• You can no longer pass US nationality to children born abroad after the effective date of loss.

Find your expatriation date for tax purposes

Tax consequences turn on the expatriation date. The IRS says that for a former citizen it is the earliest of four dates: the date you renounced before a US diplomatic or consular officer, if the renunciation is later confirmed by a Certificate of Loss of Nationality; the date you gave the State Department a signed statement of voluntary relinquishment, if later confirmed; the date the State Department issued a Certificate of Loss of Nationality; or the date a US court canceled a certificate of naturalization.

The year that includes this date is the year of your initial Form 8854. For long-term green card holders the date is set by different events, covered in green card holders abroad.

Check the three covered expatriate tests

You are a covered expatriate if you meet any one of these tests. Meeting none of them means the mark-to-market exit tax does not apply, but the Form 8854 filing duty still does.

Check the exceptions for some dual citizens and minors

The Form 8854 instructions describe two exceptions to the tax liability and net worth tests. They do not remove the certification test, so people who rely on them must still file Form 8854 and certify five years of compliance.

Dual citizens from birth: you became a US citizen and a citizen of another country at birth, you are still a citizen of that other country and taxed as its resident on the expatriation date, and you were a US resident under the substantial presence test for no more than 10 years in the 15-tax-year period ending with the expatriation year.

Certain minors: you expatriated before age 18½ and were a US resident for no more than 10 tax years before expatriating.

The day count matters here, which is why the substantial presence test calculator can help you see past years. People who never knew they were citizens should also read accidental Americans.

Understand the mark-to-market exit tax in plain terms

For a covered expatriate, section 877A treats all property as sold for its fair market value on the day before the expatriation date. Any resulting gain is taxed in that year. Losses count as the Code otherwise allows, but the wash sale rule does not apply. The total gain is reduced, but not below zero, by an exclusion amount: the IRS lists $890,000 for 2025, and Rev. Proc. 2025-32 sets $910,000 for 2026.

Some items follow their own rules. The Form 8854 instructions say that specified tax deferred accounts, such as IRAs, qualified tuition programs and health savings accounts, are treated as fully distributed the day before expatriation. Deferred compensation items that meet the conditions in the instructions can instead be subject to withholding when paid, and distributions from nongrantor trusts face 30% withholding unless other steps are taken. A covered expatriate may make an irrevocable election to defer payment of the mark-to-market tax.

The exit tax can also reach family in the United States. Publication 519 says US citizens and residents who receive gifts or bequests from a covered expatriate may owe the section 2801 tax. See exit tax for how other countries use the same idea.

File Form 8854 with the final return

Everyone who relinquishes citizenship must file an initial Form 8854 for the year that includes the expatriation date, even if they are not a covered expatriate. The instructions say to attach it to the income tax return for that year (Form 1040, 1040-SR or 1040-NR) by the return's due date, and to send a copy to the IRS address in Austin, Texas given in the instructions.

A covered expatriate files Form 8854 annually after expatriation if they deferred the exit tax, have certain deferred compensation items or have an interest in a nongrantor trust. The instructions describe a $10,000 penalty for each year you fail to file, omit information or include incorrect information, unless the failure was due to reasonable cause and not willful neglect.

Foreign account reports continue up to the expatriation date. See FBAR vs Form 8938 for the two reports.

Check the relief procedures for certain former citizens

The IRS runs relief procedures for some people who renounced without having filed as US citizens. Its page says you must meet all of these: you relinquished citizenship after March 18, 2010; you have no filing history as a US citizen or resident; your average annual net income tax did not exceed the section 877(a)(2)(A) threshold; your net worth is under $2 million at expatriation and when you apply; your total tax liability for the expatriation year and the five years before is $25,000 or less; and your past failures were non-willful.

If you qualify, the IRS says you are not treated as a covered expatriate and are not liable for unpaid tax and penalties for those years. If you file under these procedures but do not qualify, the page says you are liable for all tax, penalties and interest. People still holding citizenship who are behind on filings can compare streamlined filing compliance.

Common misconceptions

Questions to take to a professional

1. What is my expatriation date likely to be, and which tax year does that put the initial Form 8854 in?
2. Do I meet the net worth test, and how should my assets and liabilities be valued on that date?
3. What was my average annual net income tax for the five years before the expatriation date?
4. Can I certify full federal tax compliance for the past five years, and if not, what would it take to get there first?
5. Do I fit the dual-citizen-from-birth or minor exception, and how many years was I a US resident under the substantial presence test?
6. How would my retirement accounts, deferred compensation and trust interests be treated under section 877A?
7. Would gifts or bequests I make to US family later fall under the section 2801 tax?
8. Do the relief procedures for certain former citizens apply to me?

Questions people ask

Sources

• 8 U.S.C. 1481, Loss of nationality by native-born or naturalized citizenPrimary law
• DS-4079 Questionnaire - Loss of United States Nationality; Attestations (05-2025)Official guidance
• Expatriation taxOfficial guidance
• Instructions for Form 8854 (2025)Official guidance
• Rev. Proc. 2025-32 (2026 inflation adjustments)Official guidance
• 26 U.S.C. 877A, Tax responsibilities of expatriationPrimary law
• Publication 519 (2025), U.S. Tax Guide for AliensOfficial guidance
• Relief procedures for certain former citizensOfficial guidance