Form 8854 (Expatriation Statement and Exit Tax)
The required form for US citizens renouncing citizenship and long-term green card holders giving up residency, computing the mark-to-market exit tax under IRC Section 877A on covered expatriates.
Detailed Explanation
A covered expatriate is generally a US citizen who renounces or a long-term green card holder (8 of last 15 years) who gives up status if they meet any of: average annual net income tax above the inflation-adjusted threshold (around $206,000), net worth of $2 million or more, or failure to certify five years of US tax compliance. Covered expatriates are deemed to have sold all worldwide assets the day before expatriation, with capital gain in excess of an exclusion (around $890,000 for 2025) taxed at expat-tax rates. Specified tax-deferred accounts and retirement plans have separate inclusion rules.
Key Points
- Filed by US citizens who renounce and long-term green card holders (8 of last 15 years) who give up status.
- A "covered expatriate" meets any of: high average tax liability (about $206,000), net worth of $2M+, or failure to certify 5 years of tax compliance.
- Covered expatriates are deemed to sell all worldwide assets the day before expatriation (mark-to-market).
- A gain exclusion (about $890,000 for 2025, indexed) shields the first slice of deemed gain.
- Tax-deferred and certain retirement accounts have separate inclusion rules.
Practical Example
A long-term green card holder with a $5 million net worth gives up her status. As a covered expatriate she is treated as having sold all her assets the day before. If her built-in gain is $2 million, the first roughly $890,000 is excluded, and the remaining $1.11 million is taxed as capital gain on Form 8854 with her final return.
Related TS CPA Service
Expert cross-border tax compliance for expats, foreign nationals, and global businesses, penalties prevented, treaties optimized.
Learn about International TaxationRelated Terms
Foreign Earned Income Exclusion (FEIE)
A tax provision allowing qualifying US citizens and residents living abroad to exclude a portion of foreign-earned wages and self-employment income from US taxation.
Foreign Tax Credit (FTC)
A dollar-for-dollar credit on the US tax return for income taxes paid to a foreign country, designed to prevent double taxation.
FBAR (Report of Foreign Bank and Financial Accounts)
A FinCEN Form 114 filing required of US persons who hold foreign financial accounts with an aggregate value exceeding $10,000 at any point during the year.
FATCA (Foreign Account Tax Compliance Act)
A US law requiring foreign financial institutions and certain US taxpayers to report foreign financial accounts and assets to the IRS.
Have a Question About Form 8854 (Expatriation Statement and Exit Tax)?
Get a free, no-obligation answer from a licensed CPA. We respond the same day.
Free Consultation