More than 4,800 Americans gave up their U.S. citizenship in 2024, with a spike of over 2,100 renunciations in the third quarter alone—the largest quarterly increase since 2016. The majority of these individuals are “covered expatriates,” meaning they either have a net worth above $2 million or have paid substantial U.S. taxes in recent years. Even those who fall below the wealth threshold can still face the U.S. exit tax if they have paid significant taxes, so the penalty applies broadly to high‑income earners.
Who is a covered expatriate?
- Net‑worth test: $2 million or more in assets at the time of renunciation.
- Tax‑payment test: Average annual U.S. tax liability of at least $171,000 (2023 figure) for the five preceding years.
Covered expatriates are subject to an “exit tax” on the unrealized gain of their worldwide assets, calculated as if the assets were sold on the day of expatriation. Those who do not meet either test may still be taxed on certain U.S.‑source income after renunciation.
Why are wealthy Americans renouncing?
- Tax burden: The United States taxes citizens on worldwide income regardless of residence, and the IRS actively pursues non‑resident U.S. taxpayers.
- Travel complications: U.S. passport holders can face heightened scrutiny or denial of entry in countries where political tensions with the United States are high (e.g., China).
- Access to alternative passports: Many expatriates acquire citizenship through investment, donation, or ancestry, gaining visa‑free travel to a larger set of countries without the U.S. tax obligations.
Common pathways to a second citizenship
| Region / Program | Typical cost | Timeframe | Key requirements |
|---|---|---|---|
| St. Kitts & Nevis (Citizenship by Investment) | US $150,000 donation or US $200,000 real‑estate investment | ~12 months | Background check; no residency requirement |
| Malta (Citizenship by Investment) | € 1 million donation + additional contributions | 18 months | Due diligence; residence period; significant financial contribution |
| Portugal (Golden Visa → Citizenship) | € 350,000 real‑estate or € 280,000 in low‑density areas; other options include capital transfer or job creation | 5 years for residency; citizenship after 5–6 years | Minimum 7 days/yr stay (subject to change); language test for citizenship |
| Spain (Golden Visa – currently suspended for new applicants) | € 500,000 real‑estate | 1 year residency, 5 years before citizenship | Continuous residence; language and integration tests |
| Hungary (Residence Permit – not citizenship) | € 250,000 investment fund | 5 years for residency | No direct path to citizenship |
| Caribbean (e.g., Antigua & Barbuda, Dominica) | US $100,000–$150,000 donation or real‑estate | 3–6 months | Background check; minimal residency |
| Citizenship by descent | Minimal cost (document fees) | Varies | Proof of ancestry (e.g., Italian, Greek, Polish, Spanish) |
| Argentina (Rentista visa → naturalization) | Proof of income or investment; residency | 2 years residency, then naturalization | Legal residence; clean criminal record |
Note: Several European “golden visa” programs are under review. Portugal may tighten its residency requirement (90–180 days per year) or discontinue the pathway, while Spain has already halted new applications.
Practical considerations before renouncing
- Exit tax calculation: Even if you are not a covered expatriate, the IRS may still assess tax on certain U.S. assets. Professional tax advice is essential.
- Residency obligations: Some citizenship‑by‑investment programs require physical presence or minimum stay periods to maintain eligibility for eventual citizenship.
- Future program changes: Investment‑based routes can be altered or terminated by host governments, as seen with Spain and the potential tightening of Portugal’s rules.
- Travel to the United States: Renouncing eliminates visa‑free entry. Former U.S. citizens must obtain a visa or ESTA, and border officials retain discretion to deny entry, even for holders of other passports.
- Banking and financial services: Non‑U.S. citizens can open foreign bank accounts and conduct business without the extensive reporting (e.g., FATCA) required of U.S. persons, but they must still comply with local regulations.
Risks and caveats
- Loss of consular protection: Without a U.S. passport, you forfeit the right to U.S. consular assistance abroad.
- Potential deportation of dual nationals: Some EU citizens have been denied entry or deported from the U.S. on technical grounds, illustrating that dual nationality does not guarantee unrestricted access.
- Tax compliance after renunciation: Certain U.S. source incomes (e.g., U.S. real‑estate rentals) remain taxable, and the IRS may still request information under the “covered expatriate” rules.
Decision criteria
- Net worth and tax exposure: If your worldwide assets exceed $2 million or you have paid high U.S. taxes, the exit tax will be significant.
- Desired travel freedom: Evaluate the visa‑free access of alternative passports versus the convenience of the U.S. passport.
- Long‑term residency plans: Choose a citizenship route that aligns with where you intend to live, work, or invest.
- Regulatory stability: Prefer programs with a track record of continuity (e.g., St. Kitts & Nevis) over those currently under legislative review.
Renouncing U.S. citizenship remains a complex, high‑stakes decision driven by tax considerations, travel restrictions, and the availability of alternative passports. Prospective expatriates should assess their financial profile, understand the exit‑tax mechanics, and carefully evaluate the stability of any second‑citizenship program before proceeding.
