Think Hard and Twice Before Giving up Your Green Card

Think Hard and Twice Before Giving up Your Green Card

As a Green Card holder, you will have been treated like a US citizen for tax purposes, and the same is true if you decide to give up your Green Card. Basically, you will face the same exit tax that a US citizen would face if they were renouncing their citizenship.

You only face this exit tax if you are what we call a covered expat. How does one become a covered expat?

For a Green Card holder, you would fall into this category if you have held a Green Card for 8 of the last 15 years prior to leaving the United States. You could also be considered a covered expat if your net worth is over $2 million, your average annual tax liability was greater than $150K in 2013, $151K in 2012, $147K in 2011, and $145K in 2010 and 2009. If you have not been compliant with your US taxes for the last 5 years you could be considered a covered expat as well.

What does it mean to be a covered expat? Basically, it means that all of your global assets will be treated as if they were sold on the day before you gave up your Green Card at their fair market values. That could be a big tax burden for somebody, and there is a big exclusion that goes with it, which currently is $668K. So if you sell these assets and their value is over $668K, then you will face a tax of 39.6% on those monies. If the total amount of your assets is less than $668K, then you won’t face any tax at all.

As you would imagine, this can be a bit complicated and you want to make sure that if you are going to face this exit tax that you know what it is and why you are going to be facing it. Do not hesitate to contact us if you have any questions or feel that you may possibly be in this situation.