Your last dime to the IRS

Your last dime to the IRS

Exit Tax

The exit tax was introduced in the 2008 Heroes Earnings Assistance Relief Tax (also known as the HEART Act). In addition to many other clauses, it applies to US citizens giving up their citizenship, as well as green card holders of eight of the last 15 years. The tax is on all unrealized gains on your assets within the States and overseas – including gifts, trusts, bequest to US citizens and/or residents, property, and much more. The exit tax is due within 90 days of renouncing your citizenship.

The exit tax applies to you if:

  • You have a net worth equal to or more than 2 million USD
  • You have an average net US income tax liability of greater than 165,000 USD for the past five years
  • You have not and/or have failed to certify that you have been compliant with all US federal tax obligations for the past five years

This special tax is applied to the net unrealized gains on the mark-to-market basis; it’s as if you sold everything at fair market value on the day you renounced. The tax base also includes any interest in property that would have been taxed as part of your gross estate, and your assets are valued by rules governing estate tax computation.

A qualified CPA can drastically reduce your exit tax liability

There are many exceptions that apply to the exit tax. If you are renouncing US citizenship and think the exit tax  may apply to you, it’s highly recommended to have a qualified CPA examine your situation, as they may be able to lessen the blow and save you money. Even if you think it does not apply to you, it’s still a good idea to have a professional examine your circumstance as you may be liable in other areas.

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