Why Some People Give Up Their U.S. Citizenship

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When I mentioned in a recent article that I had no intention of moving back the United States, one reader asked if I had given up my U.S. citizenship. She then asked about the pros and cons of relinquishing one’s U.S. citizenship. I decided to answer her questions in an article.

Although the vast majority of the 8 million Americans living abroad choose to retain their U.S. citizenship, there are a small number each year that legally relinquish it forever. In 2016, that number was only 5,411.

The question then becomes: why would anyone voluntary give up their U.S. citizenship? Well, the reasons vary depending on the individual, but for many people it comes down to dollars and cents.

TIP: This article has several hyperlinks to other resources. They’ll be highlighted in blue.

Taxes

In case you were unaware, the U.S. is only one of two countries that tax people based solely on citizenship, regardless of whether or not they reside in the country. The other nation that does this is Eritrea, located in Africa.

At first glance, that tax policy might not sound unusual, but here’s a real-life example to put it in perspective:

Boris Johnson was born in New York to British parents in 1964. At the age of 5, he moved with his parents back to the United Kingdom and has spent the rest of his adult life there. He has had a successful career in politics and is currently the Secretary of State for Foreign and Commonwealth Affairs for the United Kingdom.

Although he left the U.S. when he was 5, he’s still required to pay taxes to the U.S. government. After selling a home in England, he received a tax bill from the IRS for their share of the capital gains. This bill came 40 years after he left the U.S. Boris Johnson later renounced his U.S. citizenship.

FATCA

In 2010, the United States enacted a piece of legislation called the Foreign Account Tax Compliance Act (FATCA). The law requires U.S. citizens with foreign financial accounts to file a report in certain circumstances. The law provides severe civil and criminal penalties for non-compliance.

Many citizens who haven’t lived in the United States for decades, like Boris Johnson, can now find themselves in trouble with the IRS for failure to comply with the law.

The U.S. tax policy, coupled with the FATCA requirements and penalties, has motivated more than a few Americans to sever their ties with Uncle Sam.

Things to Consider

Although some people may be enticed by the financial advantages of renouncing their U.S. citizenship, it’s wise to consider the following before doing it:

Irrevocable and permanent

Except as provided in Section 351 of the Immigration and Nationality Act, this is a permanent decision that cannot simply be undone if you change your mind a couple of years down the road.

You won’t be authorized to live or work in the U.S.

This is something to consider if you’re working for a U.S. company abroad.

Fees and exit taxes

The fee to renounce has been increased to $2,350. You may also have to pay an expatriation tax on your worldwide assets.

Loss of military and government pensions

For those folks living on a government pension, this should be enough to dissuade them from renouncing.

You’ll need another citizenship

It is not recommended to give up your U.S. citizenship if you’re not already a citizen of another country. A citizen is different from a legal resident, so don’t confuse the two.

People without citizenship to any country are called stateless. Stateless people aren’t entitled to the protection of any country and it’s difficult for them to travel.

You may have difficulty returning, even to visit

Depending where you obtain your new citizenship, you may be required to apply for a visa at a U.S. consulate office before traveling. That application for the visa costs around $160 and there’s no guarantee that it will be granted.

That was the case with Roger Ver, a wealthy investor who renounced his U.S. citizenship in 2014. Roger became a citizen of St. Kitts and then applied for a non-resident visa to attend a conference in Miami. The visa was denied.

If you want to avoid applying for a visa every time you want to visit the States, you can always try to get citizenship in a country that is part of the Visa Waiver Program. Passport holders from these countries can come to the U.S. as a tourist for a period of 90 days without requesting a visa at the U.S. consulate. By the way, Mexico isn’t on the list.

Let’s Wrap This Up

The decision to renounce one’s citizenship is not one to be taken lightly. In our case, we would never even consider doing it. Although we love living in Mexico, we’re still proud to be American citizens. I think that we’ve found the best of both worlds.

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About the Author

Q-Roo Paul
Paul Kurtzweil (Q-Roo Paul) is a former lieutenant from the Polk County Sheriff's Office in Florida. During his 25-year career, he received numerous commendations to include two of the agency's top honors: a Meritorious Service Medal and a Medal of Valor. In 2015, Paul retired and moved to Mexico with his wife. He now spends his days enjoying the Riviera Maya and blogging from the beach.

38 Comments on "Why Some People Give Up Their U.S. Citizenship"

  1. That’s a great article. I had no idea, I’m marrying a dual citizen and we’re planning a move to Mexican in the next 5 years and opening a business. Once you give up your citizenship I’m guessing you’ve then given up any claim on social security?
    I’ll dig into the research but any proceeds from a business we open in Mexico could be taxable in the U.S.?

    • No, you can still get Social Security. I might address that in a future article. Any yes, the U.S. will want it’s cut of your money. You can qualify for some relief though:

      http://qroo.us/2017/03/26/working-abroad-foreign-earned-income-exclusion/

    • There was a loophole (well not really a loophole since it’s legit) of being in the US for 30 days, Mexico 182 days, and then the rest some other country and not being beholden to any taxes, well at least to the foreign income exclusion around $100k.

      But in general you would decide your tax home, it depends on how much money you’d make though.

      • Yes, but that one won’t get you off the hook for U.S. self-employment tax at 15.3%, only income. You could always work for someone else though.

  2. The fee to renounce your citizenship is ridiculous (well just one ridiculous thing).

  3. Hello – thank you so much for each and every article! Forgive my lack of knowledge, does this mean you have dual citizenship?

  4. Linda Johnson | April 21, 2017 at 12:43 pm | Reply

    As always…another great article, and a MUST read if you’re considering the renouncement of your U.S. Citizenship.

  5. Forrest Veit - Tampa Bay Area. | April 21, 2017 at 12:44 pm | Reply

    As usual, this is a great article that folks should take seriously. Thanks for passing this important information on.

  6. How do you unsubscribe from this blog? When I press on” unsubscribe” in the WordPress screen, it takes me to “managing your subscription.”
    Thanks

  7. I am loving your articles as one who is still on the fence about completely 100% moving to Mexico. I am embracing the idea of up to six months in Mexico, a few months in the USA to visit grandkids and kids, then back to Mexico. The thought of taxes does scare me and the thought of the fines are scarier still.

    • Hi Christine! Thanks for following the blog. A lot of people divide their time between the two countries, that’s certainly an option. If you don’t plan on earning an income or having a bank account in Mexico, the IRS policies I explained in the article won’t affect you much.

  8. Well written and well put sir! (and good use of the correct spelling of Eritrea – your last mention of this country had it spelled incorrectly 😉

  9. that blows my mind that you can give up your citizenship but still draw social security. That is CRAZY! Go figure there is renounce fee and an expat tax…. the US will tax me to death and then tax my estate after I die! ughhh…

  10. Philip ternahan | April 21, 2017 at 3:39 pm | Reply

    Military retirees would forfeit there pensions if they renounced citizenship

  11. Useful article as usual Paul. We don’t intend to give up our US citizenship, but certainly good info for the future. Of course, no matter where you live and what you do, you can’t avoid death and taxes.

  12. Great article Paul! I couldn’t imagine giving up US citizenship under any circumstances. I’m glad you mentioned the requirement for a visa. Most people don’t realize how hard it is for Mexicans to travel to the US. Keep up the great blogs!

    • I never really thought about anyone wanting to give it up until I was asked by that one reader. Then I thought it might make an interesting topic for an article.

  13. Great article, so well written. I am with you, will never give up my US citzenship.

  14. Dr Louise F Montgomery | April 21, 2017 at 5:53 pm | Reply

    Perhaps you might do another piece on Americans who have dual citizenship; I know several. They retain their US citizenship and become Mexican citizens.

  15. Glenn Clouser | April 21, 2017 at 6:11 pm | Reply

    Paul, I just started following your site a couple months ago. I find it very useful and wanted to thank you for all the time you put into your articles. We have spent quite a bit of time in Mexico but not in your area. Hopefully in the near future we can check it out. Thanks again, looking forward to your next post.
    Glenn

  16. I didn’t mean to sound illiterate. I was texting and didn’t notice the spelling of there instead of their in my comment.

  17. Interesting write-up Paul. I have read about “now former” Americans renouncing their citizenship and I am sure much of it has to do with Uncle Sam’s huge and sharp tax-teeth swallowing up chunks of their money. I am also certainly glad that you included a large array of outcomes when an American citizen renounces their citizenship as well. Good to know!

    Wow, I was really surprised that you stated a person’s Social Security was still intact though! 🙂 I was under the assumption it would disappear afterwards. A major concern as well for people considering this proposition (as you referred to above): once they commit, they’re done and there’s no going back if they change their stance later. Being “stateless” isn’t a good idea either, even though it sounds daring and rebellious. LOL

    Well one good thing for me thus far, I won’t have to worry about taxes since SS is my only income-source and I may never know when and if, I would need to return to the states – so I would like to keep that option open.

  18. Great article and we too never even considered giving up our US citizenship. I am eligible for dual citizenship and currently working on that while here in Chicago. Maybe you can do an article (if you haven’t already) on the benefits of being a dual citizen? i.e. what my benefits would be if I am able to achieve dual US/Mexican citizenship. Also, as far as taxes go-how is retirement/pension income treated? And I believe in one of your articles you mentioned that there was a certain limit to how much we could haven a Mexican bank account before we had to report that correct? Thanks and sorry for all the questions.

  19. HI,
    I enjoy you posts! I have a question on the current article about giving up citizenship? I could be mistaken but an important consideration before giving it up, would be loss of social security benefits!

  20. Lisa Williams | April 23, 2017 at 4:23 pm | Reply

    Isn’t it possible to obtain dual citizenship and not relinquish American?

  21. Another little known drawback to renouncing U.S. citizenship is that you are no longer allowed to possess firearms in the United States. It puts you in the same prohibition as a convicted felon.

  22. John Fosbaugh | July 11, 2017 at 4:49 pm | Reply

    Thank You Again Paul for all of your valuable information.
    Mt understanding is after I reside in Mexico for 5 consecutive 5 I can apply for a dual citizenship. Is the only benefit to that is I will hold the dead to my propert6.

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