Living as an American expat can be rewarding, but it also comes with its challenges — especially when it comes to taxes. In fact, a recent survey reveals that one in four U.S. expats have seriously considered renouncing their U.S. citizenship due to frustration with U.S. tax laws.
Currently, around 9 million U.S. citizens are living abroad, according to the U.S. State Department. Many of these Americans have put down roots in their adopted countries, building careers, relationships, and communities outside the U.S. However, despite their new lives abroad, they continue to face one significant challenge: the U.S. tax system.
What the Survey Reveals About Expats and Taxes
Greenback, a company that provides tax services to U.S. expats, conducts an annual survey about the lives of Americans living overseas. For the 2022 survey, Greenback spoke with 3,200 U.S. citizens living in 121 countries. The survey covers a wide range of topics, from professional life and income to social connections and personal challenges.
Key findings include:
- 31% of respondents work for large organizations with 250 or more employees.
- Half of those surveyed reported earning less than $100,000 per year.
- Many respondents (especially those over 65) have lived abroad for over 20 years.
- Remote work is becoming more common, with many planning to work part-time remotely after the COVID-19 pandemic.
But one of the biggest frustrations for these expats? U.S. taxes.
The U.S. Citizenship-Based Taxation System
Unlike most countries, which tax based on where you live, the U.S. taxes based on citizenship. This means that even if you live overseas, you’re still required to pay U.S. income taxes on all your earnings — whether from a job, investments, or other income.
While U.S. expats may also pay taxes in the country where they live, the double tax burden can feel overwhelming. In addition to income taxes, many expats are required to report foreign bank accounts to the U.S. Department of the Treasury if the total value exceeds a certain threshold. This reporting requirement is often overlooked but is a serious legal obligation, with significant penalties for noncompliance.
Why Expats Are Frustrated
Greenback’s survey found that nearly 80% of expats believe they shouldn’t have to pay U.S. taxes while living abroad. This frustration has led many to seriously consider renouncing their citizenship. About 25% of those surveyed said they had seriously considered giving up their U.S. citizenship to escape the burden of U.S. taxes and complicated financial regulations.
Some expats are motivated by financial reasons, while others cite personal or political reasons for wanting to renounce their citizenship. Regardless of the reason, the decision to give up U.S. citizenship is not an easy one.
What Happens if You Renounce Your U.S. Citizenship?
Renouncing U.S. citizenship is a legal process that can come with significant costs and consequences. Anyone who renounces their citizenship must pay a $2,350 fee to the U.S. State Department. Those with higher net worth may also be subject to an “exit tax,” based on their global assets.
Additionally, the U.S. government warns that renouncing your citizenship won’t necessarily free you from all tax obligations. The U.S. could still claim certain rights over your assets or require military service, depending on your circumstances. This means renouncing U.S. citizenship is not a guaranteed way to escape U.S. tax laws, and it could have long-term financial and legal consequences.
The Takeaway: Is Renouncing U.S. Citizenship Worth It?
The decision to renounce U.S. citizenship is not one to be taken lightly. While taxes may be a major driving force, there are many other factors to consider, such as the financial costs and the potential impacts on future U.S. legal and tax obligations. Law and Visas understand the complexity of these decisions and are here to help guide you through every step of your immigration journey.
If you’re an expat struggling with U.S. tax issues or considering renouncing your U.S. citizenship, it’s important to seek legal and tax advice before making any decisions. Consulting with experts can help you understand your options and ensure you make the right choice for your future.
How Law and Visas Can Help?
At Law and Visas, our team of expert immigration consultants is here to make your travel to the U.S. straightforward and successful. Whether you’re applying for a B-1/B-2 Visitor Visa or an E2 Visa, we handle every step—from preparing your application to gathering the required documents.
Our Immigration Consultants and Lawyers ensure that your application meets the highest standards, with no details missed. We’ll also keep you informed throughout the process and coordinate with the immigration office or embassy on your behalf.
Law and Visas has a strong record of helping clients secure the visas/permits they need to visit the United States. You can call us today at +234 812 5505 986 to learn how we can help you
