Renouncing US Citizenship for Tax Benefits: Is It Worth the Price?

Taxes add up over time, and can eat into more than fifty percent of your income. This has led to citizens renouncing their citizenship to get a break on taxes. Even if you don’t have dual citizenship, there are advantages to hiring a tax attorney. Protecting your finances expands beyond a country’s borders, and requires decisive action.

Renouncing US Citizenship for Tax Benefits: Is It Worth the Price?
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Single

If you’re single and have no children, there are less repercussions to deal with. The paperwork is still complicated, but the path to renouncing your citizenship is much clearer. For the average citizen, it is unlikely that all of their assets combined will meet the threshold to meet the Exit Tax. The odds are even more in your favor if you’re expecting an increase in finances after renouncing your citizenship.

Married Couples

Married couples with and without children have a much more complicated path when it comes to renouncing their citizenship. That is a separate issue from the tax relief, but it does have its parallels. Instead of using one person’s assets, you now have to account for two. Depending on the occupation of each spouse, that can easily push them over the Exit Tax threshold.

Since married couples are more likely to want a side grade (or upgrade) in their living situation, there is a danger of overspending on both fronts. In a worst-case scenario, you will pay real estate taxes on selling your home, the Exit Tax for renouncing citizenship, and finally the taxes required for your new home in another country.

Business Owners

For business owners, the tax benefits of renouncing their citizenship are enormous. There will be a cost to leave, but that is offset by new lower taxes and looser compliance burdens in the new country. Business owners take a small financial hit upfront to reap long-term wealth with no downsides. In order to make this work, a tax attorney is mandatory – no exceptions. Issues with paperwork will not only cost you money, but there is a good chance you will lose complete access to your company. Mistakes for business owners have an insurmountable cost when the details are not handled by professionals.

When You’re A Prosperous Citizen

When your wealth is on the rise, it’s always a good idea to maximize how much of it leaves your pocket. Having more control over your growing income is a popular reason to renounce citizenship. While the tax benefits in a new country may be enticing, you have to look at the full picture. Where is your wealth concentrated? That will be the deciding factor in where you should go to maximize tax relief. Although the taxes may be low in your future country, there may be hard penalties attached to money that comes from nonlocal entities.

Wrap Up

You don’t have to be afraid of renouncing your citizenship to get tax relief. It’s all about being prepared for the negatives so that they don’t blindside you. With a tax attorney on call, the pros far outweigh the cons.