An increasing number of Americans are giving up their citizenship, with one motivation being strict tax rules, which extend to those that now live abroad. The workload is so high that the agency responsible for processing citizenship renunciations has raised its fees.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
A risky decision?
People assume that they will still be able to return to the U.S. to visit friends and family even after giving up their citizenship, but recent events have shown this to be a dangerous assumption. Roger Ver, also known as Bitcoin Jesus, gave up his citizenship and has just seen his request for a non-immigrant visa rejected.
The U.S. Embassy in Barbados claimed that Ver could not demonstrate sufficiently strong ties to his new home to convince them that he would definitely return following his visit to the States, but his application may also have been rejected due to his setting-up of a website which helps wealthy Americans buy citizenship in St. Kitts and Nevis.
Record numbers of Americans are renouncing their citizenship, with 2013 alone seeing a 221% increase. It is thought that many more are not included on official lists. Previously it did not matter what your motivations were for leaving, but Senators Chuck Schumer and Bob Casey introduced a bill which will double the exit tax to 30% if you leave for tax reasons.
U.S. Citizenship exit requirements
In order to leave the U.S. you prove that you have complied with tax laws for a period of 5 years. Those with a net worth of over $2 million, or average annual net income tax over the past 5 years of $157,000 or more for 2014, are subject to an exit tax. Think of it as a capital gain tax, which handily has an exception of $680,000 for 2014. You may also be required to pay the tax as a long-term resident giving up your Green Card.
These taxes do not seem to be discouraging people from leaving, perhaps because of the fact that with careful planning the tax can be vastly reduced or eliminated. Although it may be possible to reduce your tax burden, the shifting immigration situation should discourage people from acting hastily. You might end up barred from your own country.