Most green card holders who move abroad owe no exit tax at all. The tax reaches you only after a long stretch of US residency, and then only if you land in the "covered expatriate" group. Even then, the bill is often smaller than people fear, because a large exclusion comes off first and a rule for people who were not US citizens when they first became US residents can shrink the gain. This guide works through the numbers.
Do Green Card Holders Pay the US Exit Tax?
Some do, and most don't. You are in scope only as a long-term resident, and you owe tax only if you are a covered expatriate. Even then, built-in gain is taxed only above $910,000, though retirement accounts are taxed under their own rules. A green card holder who is not a long-term resident can leave with no exit tax and no Form 8854, though they still file a US return for the year they leave. If you want a first answer before you read on, our free exit tax calculator runs the tests on your own numbers.
How Close Are You to the 8-Year Line?
Closer than most people think, because a year with even one day of green card status counts in full. IRC Section 877(e)(2) counts taxable years. Take Priya, who received her green card in December 2019. Her years in the count are 2019 through 2025, which makes 7. If she gives up the card on any day in 2026, that year becomes her eighth and she is a long-term resident. Had her status ended in 2025, the exit tax could not have applied.
Your status ends, and your expatriation date is set, when you file Form I-407, when a final order of abandonment or removal is issued, or when you begin to be treated as a treaty resident of another country, keep the treaty benefits and tell the IRS on Form 8833. Treaty years can also drop out of the count. Our Form I-407 guide covers how the years are counted, and our guide to the treaty tie-breaker covers the treaty trap.
Which Tests Make You a Covered Expatriate?
Meeting any one of three tests is enough, and all three are measured on your expatriation date.
The citizen-only exceptions for dual citizens from birth and people who renounce before age 18½ do not help a green card holder. The certification test is the one that catches people with modest wealth, since a missing FBAR, Form 8938, Form 5471 or Form 3520 in any of the five years can fail it. You can fix a failed certification by filing the missing years and paying what you owe before you sign Form 8854. Doing it before your expatriation date is the safest plan. Our catch-up filing service handles that step.
How Much Exit Tax Would You Actually Pay?
On your investments and property, you pay tax only on the built-in gain above $910,000. A covered expatriate is treated as selling all worldwide property at fair market value on the day before the expatriation date, under Section 877A(a)(1). For 2026, the first $910,000 of net gain from that deemed sale is excluded, per Rev. Proc. 2025-32. Gain above that amount is taxed on your final return at the usual rates for each asset.
Anyone who was not a US citizen when they first became a US resident gets one extra rule, whether they still hold a green card or later naturalized. Under Section 877A(h)(2), property you already owned on the day you first became a US resident is treated as having a basis of at least its fair market value on that day. Only the growth after you arrived is counted. You can elect out of this rule on Form 8854, and that election is irrevocable. IRS Notice 2009-85 says the rule is not meant to cover US real estate or certain property used in a US business.
Example: Marco Gives Up His Green Card in 2026
ExampleMarco became a US resident in 2010 and gives up his green card in 2026. His net worth is $3,200,000, so he is a covered expatriate.
- Apartment abroad. Bought in 2008 for $500,000. Worth $900,000 when he arrived in 2010 and $1,300,000 today. With the Section 877A(h)(2) rule, his gain is $400,000. Without it, the gain would be $800,000.
- US brokerage account. Bought after he arrived. Built-in gain of $700,000.
- Total deemed-sale gain. $1,100,000.
- Minus the 2026 exclusion. $910,000.
- Taxable gain. $190,000. If his other income puts him in the top bracket, the 20% long-term capital gains rate makes that about $38,000 of federal tax before any net investment income tax.
Without the arrival-date rule, his taxable gain would have been $590,000. His 401(k) is not part of this figure, because retirement accounts follow their own rules.
Section 877A(b) also lets a covered expatriate defer the tax on specific property until it is sold, but only with adequate security posted with the IRS and a waiver of treaty rights. Interest runs on the deferred tax. It suits people with large illiquid holdings who can't sell to pay.
What Happens to Retirement Accounts and Pensions?
They are taxed under separate rules and get no share of the $910,000 exclusion. Section 877A(c) carves three groups out of the deemed sale.
- Specified tax-deferred accounts, such as traditional and Roth IRAs, 529 plans and HSAs, are treated as fully distributed on the day before the expatriation date, with no 10% early distribution penalty. SEP and SIMPLE IRAs count as deferred compensation.
- Deferred compensation, which includes 401(k)s and pensions, is either taxed through 30% withholding as payments are made (when the payer is a US person and the expatriate makes a timely waiver of treaty benefits) or treated as received in full at its present value on the day before expatriation.
- Interests in non-grantor trusts carry 30% withholding on later taxable distributions.
Deferred compensation earned for work done outside the US while you were not a US citizen or resident is outside these rules. For many green card holders, the retirement accounts are the largest number in the whole calculation. Our expatriation tax planning guide covers how to prepare.
What Do You File When You Give Up the Green Card?
Every long-term resident files Form 8854 with the return for the year the status ends, whether or not they are a covered expatriate. Under IRC Section 6039G(c), failing to file it carries a $10,000 penalty, and a long-term resident who never certifies compliance is treated as a covered expatriate. The year you leave also needs its US return, plus your final FBAR and Form 8938. Our Form 8854 guide covers the form itself.
Bottom Line
The green card exit tax depends on one count, three tests and one subtraction. Hold the card in 8 of the last 15 tax years, counting any part of a year, and you are a long-term resident. Meet any covered expatriate test and the deemed sale applies. Then built-in gain is taxed only above $910,000 for 2026, the arrival-date basis rule often shrinks that gain, and retirement accounts are taxed under their own rules.
The tests are fixed on the day your status ends, so the planning has to happen before you file Form I-407. Our international tax and cross-border tax teams count the years, check the tests and model the tax before you set the date. Have questions about the green card exit tax? Contact TS CPA for a free consultation. We respond within the same day.
Official IRS and Government Sources
- IRS Expatriation Tax overview
- IRS Instructions for Form 8854
- IRC Section 877A, Tax Responsibilities of Expatriation
- IRC Section 877(e), Long-Term Resident Defined
- IRC Section 6039G, Information on Individuals Losing United States Citizenship
- IRS Notice 2009-85, Guidance for Expatriates Under Section 877A
- Rev. Proc. 2025-32, 2026 Inflation Adjusted Amounts
- USCIS Form I-407, Record of Abandonment of Lawful Permanent Resident Status