Tax implications of giving up your US residency or US citizenship
United States, 18th October: Are you considering giving up your US Green Card or US citizenship? Be wary of tax implications after renouncing US citizenship.
With an increasing number of Americans moving overseas for better prospects, renouncing US citizenship or US residency is becoming more common. And this move is aimed to save income tax.
Thinking of renouncing US citizenship?—Are you also a candidate looking to renounce your US citizenship or US Green Card to save on income tax? Well, you need to aware of the consequences of doing so keeping in view the perspective of income tax.
Important guidelines regarding concerning renouncing US Green Card/US Citizenship—
A.)Are you a US Permanent resident for a minimum of last 8 years—You need to know whether you are a US Permanent resident having a US Green Card for a minimum of eight years out of the last fifteen years period ending with the calendar year in which you renounced your US citizenship in order to ascertain the tax implications of renouncing your US citizenship.
Know the renunciation date of your US Green Card or US citizenship—You need to know the exact date when you renounced your US Green Card or US citizenship. It is deemed to be the earliest of—
• The date of issuance of a certificate of loss of US nationality by the US Department of State;
• The date of renouncement of your US Green Card or US citizenship by you before a consular official or a diplomatic official of the US;
• The date of cancelation of your US naturalization certificate by any US court;
• The date when you voluntarily relinquished your US nationality through a statement signed and forwarded to the US Department of State.
Living outside the US?—Still obligatory to file income tax return—Living outside the US does not end the obligation of a US citizen or a holder of a US Green Card to file income tax return until Form 8854 has been filed.
Form 8854--This form is meant to inform the change with regard to your income tax status. It gets information with regard to the expatriation date from the US, new nation of tax residence, your tax liability in the US for the past five year along with the value (market value) of investments and properties held by you on your expatriation date.
Hence, it should be filed on the earliest date of either of the following—
• After renouncement of your US Green Card or US citizenship; or
• Along with the income tax return for the past year when you were a US Green Card holder or a US citizen. And for termination of your US Green Card, you need to give a notice regarding the termination to the Secretary.