It’s a big decision – one that has implications far beyond possibly paying an “exit tax” upon your permanent departure.
Some of the considerations you need to review include:Will you be able to return to the United States to visit relatives, receive medical treatment, etc.? Does the passport you’re using in place of a U.S. passport provide sufficient visa-free travel options for the countries you wish to visit regularly? Do you have a non-U.S. home where you can not only live comfortably, but also become integrated with the local community? Do you have U.S. assets or sources of income that would actually be subject to higher tax if you expatriate? How will your U.S. pension and social security income be taxed after expatriation?
For those of you not familiar with the concept of “expatriation,” perhaps I’m getting ahead of myself. Why might you wish to take the admittedly radical step?
One reason is taxation. The United States is one of two countries, and is the only major country, that imposes significant income, capital gains, gift, and estate taxes on its non-resident citizens and permanent residents.
In virtually all other countries, individuals end their liability to pay income tax after a sustained period of non-residence, generally one year or longer. But to legally and permanently U.S. tax liability on their worldwide income, U.S. citizens must also give up their U.S. citizenship and passport.