Expatriation Tax

An expatriation tax is a tax on someone who renounces their citizenship. In the United States, the expatriation tax provisions under Section 877 and Section 877A of the Internal Revenue Code (IRC) apply to U.S. citizens who have renounced their citizenship, and long-term residents who have ended their U.S. resident status for federal tax purposes. Different rules apply, according to the date upon which one expatriated.

Because many people who expatriated did so to avoid tax laws regarding their assets, the IRS has imposed more severe tax implications for expatriates. The IRS assumes reasons for expatriation is tax avoidance if the person who does it has an annual income over a specified benchmark figure. The ex pat tax does not apply to individuals who can prove in a ruling with the Secretary of Treasury that their reason for expatriation was not to evade taxes, such as a person with dual citizenship choosing the other country for permanent citizenship.