Key Takeaways The exit tax under IRC Section 877A treats all worldwide assets as sold at fair market value on the day before expatriation Only covered expatriates are subject to the exit tax — defined by net worth, tax liability, or certification requirements Form 8854 (Initial and Annual Expatriation Statement) must be filed in the year of expatriation and may be required annually thereafter Long-term residents (8+ years with a green card) are subject to the same expatriation rules as citizens FBAR and FATCA obligations continue until the expatriation is complete and properly reported Planning before expatriation with experienced tax professionals can significantly reduce tax exposure Overview: Why Expatriation Tax Matters The decision to renounce US citizenship or abandon a green card carries significant and often unexpected tax consequences. Unlike virtually every other developed nation, the United States imposes a departure tax on individuals who give up their status — a tax that can reach into millions of dollars for wealthy expatriates. Understanding the Expatriation Tax Regime The United States imposes a unique tax on citizens and long-term residents who give up their US status. Unlike most countries, which simply stop taxing residents who leave, the US imposes a mark-to-market exit tax designed to capture unrealized appreciation on worldwide assets before the individual departs the US tax system. The current expatriation tax regime, codified in IRC Section 877A, was enacted as part of the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008. It applies to US citizens who relinquish citizenship and long-term residents (green card holders for at least 8 of the past 15 years) who terminate their residency. The exit tax operates by treating the expatriating individual as having sold all worldwide assets at fair market value on the day before the date of expatriation. Any gain...