Renouncing US citizenship triggers the exit tax only if you are a covered expatriate. For 2026 that means an average annual net income tax above $211,000, a net worth of $2,000,000 or more, or a failure to certify five years of tax compliance on Form 8854. The first $910,000 of deemed gain is excluded.
Most people who renounce never pay it. Two of the three tests are thresholds a typical American abroad does not meet. The third is not a threshold at all, and it is the one that catches people.
| Test | What it measures | Threshold for 2026 | Waived by the dual-citizen or minor exception? |
|---|---|---|---|
| Net income tax test | Average annual net income tax for the five tax years before expatriation | More than $211,000 | Yes |
| Net worth test | Net worth on the expatriation date | $2,000,000 or more — not indexed for inflation | Yes |
| Certification test | Five years of federal tax compliance, certified on Form 8854 | No dollar figure — you certify or you do not | No |
What the exit tax actually taxes
It taxes gains you have not realized. Section 877A treats a covered expatriate as having sold every interest in property at fair market value on the day before the expatriation date, and taxes the net gain. For taxable years beginning in 2026 the first $910,000 is excluded under section 877A(a)(3), a figure set by Revenue Procedure 2025-32.
Gains are counted without regard to other rules in the Code, and losses are allowed to the extent the Code otherwise allows them, except that the wash sale rule in section 1091 does not apply. The Form 8854 instructions allocate the exclusion across the gain assets in proportion to each asset’s built-in gain, not to whichever asset you prefer.
Payment can be deferred property by property, but the election requires adequate security such as a bond, an irrevocable waiver of any treaty right that would block assessment or collection, and interest for the whole deferral period.
Who is a covered expatriate in 2026
Any one of three tests makes you one. Revenue Procedure 2025-32 sets the 2026 income figure at more than $211,000 of average annual net income tax for the five tax years ending before the expatriation date. The net worth test is $2,000,000 or more on that day. The third is the Form 8854 certification.
The two figures behave differently. The income threshold is indexed and moves most years — it stood at $206,000 for 2025. The $2,000,000 net worth figure sits in section 877(a)(2)(B) with no inflation adjustment attached, so it has reached further every year since 2008. A long-held home, a retirement account and an accrued pension can pass it.
The certification test has no threshold at all. Fail to certify, under penalty of perjury, that you met every federal tax obligation for the five tax years preceding expatriation, and you are a covered expatriate whatever your income or net worth.
The dual-citizen exception does not cover the certification test
It covers the first two tests only. Section 877A(g)(1)(B) disapplies subparagraphs (A) and (B) of section 877(a)(2) — the income and net worth tests — for two narrow groups. Subparagraph (C), the certification test, is absent from that list and applies to everyone.
- Dual citizens from birth: you became a US citizen and a citizen of another country at birth; on the expatriation date you remain a citizen of that country and are taxed there as a resident; and you were a US resident for not more than 10 of the 15 tax years ending with the year you expatriated.
- Certain minors: you relinquished before age 18 and a half and were a US resident for not more than 10 tax years before relinquishment.
- US residence for both tests is measured by the substantial presence test. Neither group escapes Form 8854, and neither escapes the five-year certification.
What renouncing costs at the consulate in 2026
$450. The State Department cut the fee for administrative processing of a request for a Certificate of Loss of Nationality from $2,350 to $450 in a final rule published on 13 March 2026 at 91 FR 12296, effective 13 April 2026. The Schedule of Fees at 22 CFR 22.1 now carries $450 at item 8.
The fee buys the consular act, not the tax outcome. It applies under 8 U.S.C. 1481(a)(5) — the oath of renunciation before a US diplomatic or consular officer abroad — and to requests under 1481(a)(1) to (a)(4). Eight commenters who had already paid $2,350 asked for the $1,900 difference back; the Department declined, saying neither fee statute permits a retroactive change.
Form 8854, and the $10,000 penalty
Form 8854 goes in with the income tax return for the year that includes the expatriation date. Where no return is required, it is sent to the IRS by the date that return would have been due, including extensions. Filing it late, incomplete or incorrect carries a $10,000 penalty for that year unless reasonable cause and the absence of willful neglect are shown.
One filing is rarely the end of it. An annual Form 8854 is due for each later year in which you deferred the mark-to-market tax, hold an eligible deferred compensation item, or are the beneficiary of a nongrantor trust.
Retirement accounts are not marked to market
They are taxed under separate rules instead. Section 877A takes deferred compensation items, specified tax deferred accounts and interests in nongrantor trusts out of the deemed sale, reaching each through withholding or a deemed distribution. An IRA is not treated as sold; it is treated as paid out in full.
- Eligible deferred compensation items: the payor withholds 30 percent of every taxable payment. That treatment depends on an irrevocable waiver of any treaty reduction, made on the first Form 8854, and on notifying the payor on Form W-8CE by the earlier of the day before the first distribution on or after the expatriation date, or 30 days after it.
- Ineligible deferred compensation items: you are treated as receiving the present value of your accrued benefit on the day before the expatriation date.
- Specified tax deferred accounts: your entire interest is treated as received on the day before the expatriation date. The category covers individual retirement plans, qualified tuition programs, qualified ABLE programs, Coverdell education savings accounts, health savings accounts and Archer medical savings accounts.
- Interests in nongrantor trusts: taxable distributions carry 30 percent withholding and any treaty reduction is treated as waived, unless you obtain a valuation letter ruling from the IRS and elect to be treated as having received your whole interest.
Section 2801: the tax your American family pays
It falls on the recipient, not the expatriate, at 40 percent. Section 2801 taxes a US citizen or resident who receives a covered gift or covered bequest from a covered expatriate. The recipient files Form 708 and multiplies the net covered gifts and bequests for the calendar year by 40 percent.
Final regulations (TD 10027) took effect on 14 January 2025 and Form 708 filing begins with 2025 transfers. For 2025 and 2026 the section 2801(c) amount is $19,000; receipts at or below that figure in a calendar year are not taxed and no return is required. The amount is indexed after 2026.
Form 708 is due on the fifteenth day of the sixth month of the following calendar year — 15 June 2027 for a covered bequest received in 2026. The recipient treats the transferor as a covered expatriate unless documentation establishes otherwise, a presumption the expatriate rebuts by authorizing disclosure of the relevant return information.
If you are behind on your filing
The Relief Procedures for Certain Former Citizens let some people certify compliance without becoming covered expatriates. They are open only where the past failure to file was non-willful, and every criterion has to be met.
- You relinquished US citizenship after 18 March 2010.
- You have no filing history as a US citizen or resident.
- You did not exceed the section 877(a)(2)(A) income tax threshold for the five tax years before expatriation.
- Your net worth is under $2,000,000 both at expatriation and at the time of the submission.
- Your aggregate tax liability is $25,000 or less for the year of expatriation and the five prior years.
Those who qualify are not covered expatriates under section 877A and are not liable for the unpaid tax and penalties for those years. The $2,000,000 net worth test applies here with no exceptions, including those in section 877A(g)(1)(B).
Your name is published either way
It appears in the Federal Register, whether or not you are a covered expatriate. Section 6039G requires publication, within 30 days of the close of each calendar quarter, of the name of every individual losing US citizenship about whom Treasury received information that quarter. The 2026 notices ran on 23 January, 22 April and 23 July.
Sources
- Internal Revenue Service — Revenue Procedure 2025-32 (2026 inflation adjustments) — https://www.irs.gov/pub/irs-drop/rp-25-32.pdf — checked 28 September 2026
- US House of Representatives — 26 U.S.C. 877A, Tax responsibilities of expatriation — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section877A&num=0&edition=prelim — checked 28 September 2026
- US House of Representatives — 26 U.S.C. 877, Expatriation to avoid tax — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section877&num=0&edition=prelim — checked 28 September 2026
- Internal Revenue Service — Instructions for Form 8854 (2025) — https://www.irs.gov/instructions/i8854 — checked 28 September 2026
- Internal Revenue Service — Expatriation tax — https://www.irs.gov/individuals/international-taxpayers/expatriation-tax — checked 28 September 2026
- Internal Revenue Service — Relief Procedures for Certain Former Citizens — https://www.irs.gov/individuals/international-taxpayers/relief-procedures-for-certain-former-citizens — checked 28 September 2026
- Internal Revenue Service — Instructions for Form 708 (December 2025) — https://www.irs.gov/pub/irs-pdf/i708.pdf — checked 28 September 2026
- Federal Register — Schedule of Fees for Consular Services: Fee for Administrative Processing of Request for Certificate of Loss of Nationality, 91 FR 12296 (13 March 2026) — https://www.federalregister.gov/documents/2026/03/13/2026-04931/schedule-of-fees-for-consular-services-fee-for-administrative-processing-of-request-for-certificate — checked 28 September 2026
- GovInfo — Federal Register Vol. 91 No. 49, 13 March 2026, pages 12296 to 12300 (full rule text) — https://www.govinfo.gov/content/pkg/FR-2026-03-13/pdf/2026-04931.pdf — checked 28 September 2026
- Office of the Federal Register — eCFR, 22 CFR 22.1, Schedule of fees — https://www.ecfr.gov/current/title-22/chapter-I/subchapter-C/part-22/section-22.1 — checked 28 September 2026
- US House of Representatives — 26 U.S.C. 6039G, Information on individuals losing United States citizenship — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section6039G&num=0&edition=prelim — checked 28 September 2026
- US House of Representatives — 8 U.S.C. 1481, Loss of nationality by native-born or naturalized citizen — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title8-section1481&num=0&edition=prelim — checked 28 September 2026
Common questions
- Do I have to pay the exit tax if I renounce my US citizenship?
- Only if you are a covered expatriate. For 2026 that means an average annual net income tax over $211,000 for the five tax years ending before your expatriation date, a net worth of $2,000,000 or more on that date, or a failure to certify five years of federal tax compliance on Form 8854. Meeting none of the three means no exit tax.
- How much does it cost to renounce US citizenship in 2026?
- $450 for the consular processing. The State Department cut the fee for administrative processing of a request for a Certificate of Loss of Nationality from $2,350 to $450 in a final rule published on 13 March 2026 at 91 FR 12296, effective 13 April 2026. The Schedule of Fees at 22 CFR 22.1 carries $450 at item 8.
- I paid $2,350 to renounce — can I get the difference back?
- No. Eight commenters who had already paid $2,350 asked for the $1,900 difference once the reduction was proposed, and the State Department declined. Its stated ground was that neither of the statutes under which it sets consular fees permits a retroactive change. The $450 figure took effect on 13 April 2026 and does not reach earlier payments.
- Is the $2 million net worth test adjusted for inflation?
- No. The $2,000,000 figure sits in section 877(a)(2)(B) with no inflation adjustment attached to it, so it has reached further every year since 2008. The income test moves the other way. Revenue Procedure 2025-32 puts it at more than $211,000 of average annual net income tax for 2026, against $206,000 for 2025.
- I was born a dual citizen — does that exempt me from the exit tax?
- It exempts you from two tests of the three. Section 877A(g)(1)(B) disapplies the income and net worth tests for dual citizens from birth who remain citizens of, and are taxed as residents of, that other country, and who were US residents for not more than 10 of the 15 tax years ending with the year of expatriation. The certification test still applies.
- What happens if I renounce without filing five years of tax returns?
- You become a covered expatriate through the certification test, whatever your income or net worth. Form 8854 asks you to certify, under penalty of perjury, that you met every federal tax obligation for the five tax years preceding expatriation. Failing that certification brings the mark-to-market regime with it, and the dual-citizen and minor exceptions do not reach it.
- Can I fix years of unfiled returns before I renounce?
- The IRS Relief Procedures for Certain Former Citizens let some people certify compliance without becoming covered expatriates. They require a non-willful failure to file, relinquishment after 18 March 2010, no filing history as a US citizen or resident, net worth under $2,000,000 both at expatriation and at submission, and aggregate tax liability of $25,000 or less for the year of expatriation and the five prior years.
- Will my IRA be taxed when I expatriate?
- It is treated as paid out rather than sold. Specified tax deferred accounts sit outside the deemed sale under section 877A, and a covered expatriate is treated as receiving the entire interest on the day before the expatriation date. The category also covers qualified tuition programs, qualified ABLE programs, Coverdell education savings accounts, health savings accounts and Archer medical savings accounts.
- When is Form 8854 due, and what is the penalty for not filing it?
- It goes in with the income tax return for the year that includes your expatriation date. Where no return is required, it is sent to the IRS by the date that return would have been due, including extensions. Filing it late, incomplete or incorrect carries a $10,000 penalty for that year unless reasonable cause and the absence of willful neglect are shown.
- If I renounce, will my family in the US be taxed on money I give them?
- At 40 percent, and the recipient pays it rather than the expatriate. Section 2801 taxes a US citizen or resident who receives a covered gift or covered bequest from a covered expatriate, reported on Form 708. For 2025 and 2026 the first $19,000 received in a calendar year sits outside the tax, and no return is required where receipts do not exceed that figure.
- Is my renunciation made public?
- Your name appears in the Federal Register. Section 6039G requires publication, within 30 days of the close of each calendar quarter, of the name of every individual losing US citizenship about whom Treasury received information that quarter. It applies whether or not you are a covered expatriate. The 2026 notices ran on 23 January, 22 April and 23 July.
A note on tax content
Tax content on this site is for general informational purposes only and does not constitute tax advice. Rules for U.S. citizens abroad depend on individual circumstances, country of residence, income sources, account structures, and applicable treaties — always consult a qualified tax professional in the relevant jurisdiction before making decisions.
The information provided by US Expat is for educational and informational purposes only. It should not be treated as personalized tax, legal, immigration, investment, insurance, or financial advice. U.S. citizens abroad should consult qualified professionals who understand their specific facts and circumstances. US Expat is not a law firm, tax filing firm, or immigration law firm.
Rules and thresholds for U.S. citizens abroad change. Pages are reviewed periodically; confirm current details with a qualified professional before acting.
