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Under the US exit tax, the IRS treats a covered expatriate as having sold everything the day before giving up citizenship or a long-held green card. The IRS calls it the expatriation tax.
A senior CPA reviews your situation in confidence, with a reply in about two hours.
$2,000,000. Net worth on the expatriation date at which you become a covered expatriate.
$211,000. Average annual net income tax over the five prior years above which you become a covered expatriate (2026).
$910,000. Gain excluded from the deemed sale for expatriations in 2026.
You are a covered expatriate under IRC section 877A if you meet any one of three tests.
Your worldwide net worth is $2,000,000 or more on the expatriation date, counting your home, business, retirement accounts and trust interests. The $2,000,000 figure is not adjusted for inflation.
Your average annual net income tax for the five years before expatriation exceeds $211,000 for 2026, under Rev. Proc. 2025-32.
You cannot certify on Form 8854, under penalty of perjury, that you met every federal tax obligation for the five prior years. One unfiled return in those years is enough to fail.
Green card holders pay the exit tax only as long-term residents. A long-term resident held the card in at least 8 of the 15 tax years ending with the year they give it up. A card held since 2018 is long-term in 2026. A long-term resident who claims treaty benefits as a resident of another country is treated as having ended US residency.
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Two groups avoid the net worth and tax liability tests if they pass the certification test:
Four types of asset have their own rules and no deemed sale.
| Asset | Treatment at expatriation |
|---|---|
| Eligible deferred compensation (a US employer's 401(k) or pension) | No deemed sale; the payer withholds 30% of each later distribution after you file Form W-8CE |
| Ineligible deferred compensation (such as a foreign pension) | Present value taxed as received the day before expatriation |
| Specified tax deferred accounts (IRA, HSA, 529) | Treated as fully distributed the day before expatriation, with no early withdrawal penalty |
| Interest in a nongrantor trust | No deemed sale; the trustee withholds 30% of the taxable part of each distribution |
A covered expatriate can elect to defer the tax on a deemed gain until the asset is sold, by posting security the IRS accepts and paying interest. The election is irrevocable per asset.
Illustrative: one unmarried covered expatriate in 2026 with no other income or deductions, all gains long-term, no state tax, no deferral election. Brackets from Rev. Proc. 2025-32; the IRS charges the net investment income tax on modified adjusted gross income over $200,000.
| Item | Amount |
|---|---|
| Brokerage account: value $6,000,000, basis $2,500,000 | Deemed gain $3,500,000 |
| Less the 2026 exclusion | $910,000 |
| Taxable deemed gain | $2,590,000 |
| First $49,450 at 0% | $0 |
| Next $496,050 at 15% | $74,407.50 |
| Remaining $2,044,500 at 20% | $408,900 |
| Net investment income tax: 3.8% of $2,390,000 | $90,820 |
| Federal tax | $574,127.50 |
You can lower the tax with gifts, sales, basis step-ups and the timing of the final return. We model the options before anything is filed.
You can cut net worth below $2,000,000 with gifts before expatriating. Gifts to a US citizen spouse are unlimited; for others you use the $19,000 annual exclusion (2026) and your lifetime exemption.
If you sell appreciated assets in the years before you expatriate, you spread the gain over several returns and lower brackets.
Through the IRS Streamlined Filing Compliance Procedures or amended returns, you can certify five years of compliance. If your net worth and average tax are also under the limits, you leave as a non-covered expatriate.
The IRS raises the exclusion and the tax liability threshold for inflation each year. If you expatriate early in the year, a shorter part of that year is taxed as a US person.
After you expatriate, your gifts and bequests to US persons over $19,000 a year (2026) are taxed to the recipient under IRC section 2801, at the top estate tax rate.
Your last five returns, a list of assets with cost basis, and any pension or trust statements, through the secure portal.
A CPA checks all three covered expatriate tests and lists any missing filings.
We value each asset, calculate the US exit tax and compare the planning options.
We prepare the final return and Form 8854 for the expatriation year.
We quote after a short review, based on:
The light end is a non-covered expatriate with five compliant years and one brokerage account. These are the factors, not a quote.
Every expatriate files Form 8854 with the final return for the expatriation year, whether covered or not. The IRS can impose a $10,000 penalty when a required form is missing. On the form you certify five years of compliance and report your net worth and the deemed sale.
Send your last five returns, and a CPA tells you whether you are covered and what the deemed sale would cost.
