Renounce US Citizenship: Pros, Cons, and How It Works
Written by John Woodfield Portfolio Manager, CFP®, CIM® and Tiffany Woodfield, TEP, Associate Portfolio Manager, CRPC®, CIM®
Should You Renounce Your U.S. Citizenship?
Deciding to renounce U.S. citizenship is a significant and personal choice that involves evaluating your unique circumstances and plans.
You may wish to renounce your U.S. citizenship for financial or personal reasons, such as tax obligations or political beliefs. However, before making such a decision, consulting with a cross-border lawyer and a cross-border advisor is crucial to understanding the implications.
Key Points:
- Renouncing U.S. citizenship is a significant, personal decision often driven by financial or personal reasons.
- Common reasons include concerns about double taxation, FATCA compliance, and political beliefs.
- Alternatives to renunciation include dual citizenship, permanent residency, tax planning, and working with a cross-border wealth management team.
- Steps to renounce include contacting a U.S. Embassy, completing forms, and attending an interview.
- Required documents for renunciation include a U.S. passport, birth certificate, and a statement of reason.
- The Immigration and Nationality Act of 1952 outlines citizenship acquisition and loss regulations.
- Exit tax may apply.
- The duration of the renunciation process varies, typically taking anywhere from a few months to a year.
- Regaining U.S. citizenship post-renunciation is challenging, requiring standard naturalization processes.
- The renunciation fee as of 2024 is $2,350, covering administrative costs.
6 Tips for U.S. Citizens Who Are Considering Renouncing
- Meet with a U.S. consular or diplomatic officer to gain a comprehensive understanding of the renunciation process and what it entails.
- Understand U.S. citizenship obligations fully before making a decision to renounce, as this can impact your financial and legal status internationally.
- Engage with U.S. Citizenship and Immigration Services to ensure that you have all the necessary information and documentation required for renouncing your citizenship.
- Consider the position of United States citizens abroad and how your status as a non-citizen may affect your rights, privileges, and ability to travel or work internationally.
- Discuss any concerns or questions you may have about renouncing your citizenship and living abroad with a diplomatic or consular officer and a lawyer.
- Make sure you've considered all other options before renouncing your citizenship, as it is not easily reversed.
For the most up-to-date information and forms, visit the U.S. Citizenship and Immigration Services Website
Reasons for Renouncing U.S. Citizenship
We've found that there are many reasons U.S. citizens wish to renounce; however, financial concerns are often at the top of the list.
Reasons for renouncing U.S. citizenship can include concerns about double taxation, a desire to avoid the U.S.'s global income reporting requirements, or a personal decision to reside in another country permanently. Some individuals may also renounce due to political reasons or to simplify their financial affairs.
These are some of the main reasons that you may wish to renounce your citizenship:
Taxation Issues:
- The burden of potential double taxation for citizens living abroad
- The requirement to file U.S. tax returns regardless of residence
- Complexities and costs associated with FATCA (Foreign Account Tax Compliance Act) compliance
- Potential exposure to the U.S. estate tax
Financial Reasons:
- High cost of annual tax preparation for compliance with U.S. tax laws
- Banking and financial service restrictions for U.S. citizens abroad
- Avoidance of the expatriation tax for high-net-worth individuals
Personal and Lifestyle Reasons:
- The desire for simplified financial and legal affairs
- Permanent residency or strong personal ties in another country
- Intention to acquire or maintain citizenship in a country that does not allow dual citizenship
Privacy Concerns:
- Avoiding the extensive reporting requirements imposed on U.S. citizens living abroad
- Concerns over privacy and data security with financial information reporting
Alternatives to Renouncing Your Citizenship
However, keep in mind that renunciation isn't your only option.
Alternatives to renouncing U.S. citizenship include obtaining dual citizenship or permanent residency in another country, which can offer some benefits of living abroad without renouncing. It's also possible to legally reduce U.S. tax obligations through tax planning strategies.
Working with a cross-border financial advisor and cross-border accountant can simplify your financial situation and take the burden off your shoulders. When you have a cross-border team that's taking care of everything for you, it's much easier to sleep well at night. You'll be able to maintain your dual citizenship without worrying about the financial implications.
Below are some alternatives to renouncing:
1 - Obtaining Dual Citizenship
Maintaining U.S. citizenship while acquiring citizenship of another country, where permitted
2 - Obtaining Permanent Residency
Securing the right to live in another country indefinitely without giving up U.S. citizenship
3 - Doing Cross-Border Tax Planning
Using legal strategies to minimize U.S. tax liabilities without renouncing citizenship
4 - Changing Tax Residency
Moving tax residency to a U.S. state with more favourable tax treatment for foreign income
5 - Investing in Tax-Efficient Vehicles
Investing in financial products that are taxed in a more favourable manner under U.S. tax laws
6 - Working With a Cross-Border Team
Put together a cross-border team that includes a lawyer, accountant, and financial advisor who will work together to ensure you're covered no matter where you live.
How To Renounce Your U.S. Citizenship: The Basic Steps
To renounce your U.S. citizenship, you must voluntarily apply to renounce it in a foreign country, typically at a U.S. Embassy or Consulate. The process involves an interview to ensure an understanding of the consequences, taking the oath of renunciation, and possibly facing an exit tax. The procedure concludes with the issuance of a Certificate of Loss of Nationality.In brief, these are the steps that you may take when renouncing. They may change, so please seek the advice of an attorney before proceeding.
- Contact a U.S. Embassy or Consulate in your country of residence to express your intent to renounce citizenship.
- Schedule an appointment for the renunciation process.
- Complete all necessary forms and gather the required documentation.
- Attend your appointment, during which you will have an interview to ensure you understand the consequences of renunciation.
- Take the Oath of Renunciation.
- Pay the renunciation fee.
- Wait for the issuance of your Certificate of Loss of Nationality.
Requirements for Renouncing
There are a few basic requirements to renounce your U.S. citizenship.
Renouncing requires that you are at least 18 years old, fully understand the consequences of renunciation, and do not have any pending military or governmental obligations. It is essential to be of sound mind and renounce voluntarily without coercion or undue influence.
Required Documents for Renouncing Your Citizenship
The required documents for renouncing U.S. citizenship typically include a valid U.S. passport, birth certificate, or naturalization certificate, evidence of any name changes, and completed forms related to the renunciation process. Additionally, you may need to provide a statement explaining your reason for renouncing.
- Valid U.S. passport
- Birth certificate or Certificate of Naturalization
- Evidence of any name changes
- Completed forms related to the renunciation process
- A statement explaining your reason for renouncing
- Recent photographs
Expatriating Act and Renunciation
The Expatriating Act refers to the legal act of renouncing one's citizenship.
Renunciation is considered an expatriating act under U.S. law, meaning it's a formal process by which a citizen relinquishes their nationality. This act is irreversible and carries significant legal and financial implications.
Consequences of Renouncing Your Citizenship
Renouncing U.S. citizenship leads to losing the right to live and work in the U.S. without immigration restrictions, voting rights, and protection from U.S. diplomatic services. Additionally, one may be subject to an expatriation tax. It's a permanent decision that cannot be reversed simply because one changes their mind later.
Loss of Rights When Renouncing U.S. Citizenship
Upon renouncing U.S. citizenship, you lose several rights, including the right to enter the U.S. without a visa, vote in U.S. elections, and receive protection from U.S. consulates while abroad. You also forfeit access to U.S. government employment and benefits like social security, except under specific international agreements.
What Is the Nationality Act?
The correct name of the act is the Immigration and Nationality Act.
The Immigration and Nationality Act (INA), established in 1952, consolidated and restructured immigration law by gathering numerous provisions. Over time, it has undergone multiple amendments, encompassing key elements of immigration legislation.
The INA codifies the rules for acquiring U.S. citizenship either at birth or through naturalization. It also outlines the grounds on which a person can lose their U.S. citizenship, either voluntarily through acts like renunciation or involuntarily through actions that are deemed to signify an intention to relinquish citizenship.
Common Questions
What is the exit tax when renouncing U.S. citizenship?
The exit tax, also known as the expatriation tax, is applied to those renouncing U.S. citizenship and is calculated based on an individual's net worth and unrealized gains as if they sold their assets on the day before renunciation. To be subject to the exit tax, one must meet certain criteria related to net worth, tax liability, or compliance with tax filings over the last five years. It's designed to tax the capital gains of those leaving the tax system.
For more information, please read our article about exit tax in the USA.
How do you apply to renounce your citizenship?
To apply to renounce your citizenship, you must contact a U.S. Embassy or Consulate in the country where you reside. The process involves scheduling an appointment, completing the necessary paperwork, and attending an interview where you will formally declare your intention to renounce and understand its implications. It concludes with taking an oath of renunciation.
How long does renouncing U.S. citizenship take?
The time frame to renounce U.S. citizenship can vary significantly depending on the specific U.S. Embassy or Consulate and the individual’s situation. It can take anywhere from a few months to over a year from the initial application to the final receipt of the Certificate of Loss of Nationality.
Can you get your U.S. citizenship back after renouncing it?
Once renounced, U.S. citizenship is very difficult to regain. Individuals who renounce their citizenship must go through the standard immigration process if they wish to return to the U.S., including obtaining a visa. In exceptional circumstances, one may apply for naturalization again, but they must meet all standard eligibility criteria and go through the entire process like any other applicant.
How much does it cost to renounce U.S. citizenship in 2024?
As of this writing (April 1, 2024), the fee to renounce U.S. citizenship is set at $2,350. This fee is payable at the time of your renunciation appointment at a U.S. Embassy or Consulate. It is among the highest fees in the world for renouncing citizenship and is meant to cover the administrative costs of the process. To see the up-to-date fees, go to the U.S. Embassy Website >
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ABOUT THE AUTHORS
Tiffany Woodfield is an Associate Portfolio Manager licensed in Canada and the USA, a Chartered Investment Manager (CIM), a Chartered Retirement Planning Counselor (CRPC), a Trust and Estate Practitioner (TEP), and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany advises clients who live in Canada and the United States and want to simplify their cross-border financial plan, move their assets across the border, and optimize their investments to minimize their tax burden. Together, Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe whether they live in Canada or the U.S.
John Woodfield is a Financial Management Advisor (FMA), a Chartered Investment Manager (CIM), and a Certified Financial Planner (CFP). In 2007, he was inducted as a fellow of the Canadian Securities Institute (FCSI). As a portfolio manager and CFP®, he works with clients across Canada. John Woodfield’s clients are families, individuals, and business owners who understand the importance of comprehensive wealth and investment plans driven by the lifestyle they want to lead.
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