Narayan AmmachchiThousands of Americans are choosing to give up their citizenship each year, driven by frustration with the Internal Revenue Service’s (IRS) far-reaching tax laws and complex compliance requirements.
Wealthy Americans make up a significant portion of them. Also in the group are “accidental Americans,” who were born in the U.S. but lived there for a very short period.
The U.S. is one of the few countries that taxes its citizens regardless of their residency. This means that Americans living overseas are obligated to file U.S. tax returns and pay taxes on their worldwide income.
Over the past decade, more than 32,000 Americans have renounced their citizenship, according to the government data. In 2023 alone, approximately 3,000 individuals formally gave up their citizenship, and an additional 2,000 filed applications in the first half of the year.
A recent survey by Greenback Expat Tax Services indicates that nearly one-third of U.S. expats are considering leaving the country permanently.
Renouncing citizenship is a complex and costly process that can take years to complete. Individuals who live abroad and ignore the need of renouncing their citizenship formally may face restrictions on re-entry to the U.S.
A significant factor contributing to this exodus is the Foreign Account Tax Compliance Act (FATCA), enacted by the Obama administration to combat tax evasion.
FATCA requires foreign financial institutions to report information on U.S. account holders to the IRS. This has led many foreign banks to restrict services to Americans, including mortgages and basic banking, to avoid the burdensome reporting requirements.
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