global Tax Giving Up Your Green Card After 8 years in the U.S.? Know the Exit Tax Implications September 18, 2024 If you’re considering renouncing your U.S. green card after holding it for 8 years or more, it’s crucial to be aware of the exit tax implications. Here’s what you need to know: Are you looking to give up your U.S. green card? Remember that simply letting it expire does not end your permanent resident status. You may still be liable for U.S. taxes, and additionally the unpopular exit tax. Here’s what you should know when turning in your green card. Who is considered a long-term resident (LTR)? A long-term resident who has held a green card for at least 8 of the last 15 years, including any part of a year. Even a single day of legal residency in a year counts towards this 8-year requirement. What happens if you relinquish your green card? If you give up your green card after holding it for 8 years or more, you may be classified as a “covered expatriate,” which entails specific tax responsibilities. On the other hand, if you’ve held your green card for less than 8 years, you are generally not considered a long-term resident and may not be subject to the exit tax. Who is considered a covered expat? Check out our blog, Relinquishing U.S. Citizenship? What You Should Know about the Exit Tax and Covered Expat Status. How do you give up the green card? To formally abandon your green card and end your permanent resident status, you must file Form I-407 with a U.S. consular or immigration officer. What is the exit tax? The exit tax, also known as the expatriation tax, is imposed on U.S. citizens and long-term residents who renounce their citizenship or terminate their U.S. resident status for tax purposes. How do you calculate the exit tax? To calculate the exit tax, first subtract the exclusion amount ($866,000 for 2024) from your total unrealized gains on worldwide assets. Then, apply the applicable capital gains tax rate to the remaining amount, depending on the type of asset. How can you avoid the exit tax? Ensure Tax Compliance: Make sure you are up-to-date with your U.S. tax obligations for the past 5 years. This helps avoid being classified as a covered expatriate.Plan Your Expatriation Timing: If you’ve held your green card for less than 8 years and do not plan to return to the U.S., consider expediting your exit to avoid long-term resident status.Consolidate Foreign Accounts: Multiple foreign accounts increase your reporting obligations. Consolidation can simplify compliance.Avoid Foreign Mutual Funds: These investments are subject to higher taxes.Consider U.S. Taxes in Business Planning: Be mindful of U.S. tax implications when engaging in business activities. For personalized advice and assistance with your green card exit strategy, contact us to ensure a smooth and tax-efficient process.
