The top reason why Americans abroad want to dump their U.S. citizenship (2024)

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While tax season puts a strain on filers every year, the burden is worse for Americans overseas.

About 9 million U.S. citizens are living abroad, the U.S. Department of State estimates.

Nearly 1 in 4 American expats are "seriously considering" or "planning" to renounce their U.S. citizenship, a survey from Greenback Expat Tax Services found.

The company surveyed more than 3,100 American expats in 125 countries from April 15 through May 10.

For those looking to ditch their citizenship, more than 4 in 10 say it's because of U.S. tax filing requirements.

Expat tax filing requirements

American expats pay annual U.S. income taxes on worldwide earnings, such as salaries, interest, rental income, business profits and more.

U.S. citizens and resident aliens must file taxes and cover what they owe, regardless of where they live. These rules mean expats may have to file and pay taxes in two places.

Extra reporting

Once balances across foreign accounts pass $10,000, expats must file the Report of Foreign Bank and Financial Accounts, known as FBAR, with the Treasury Department.

Some expats may also have to disclose foreign financial accounts, such as savings and investments.

For example, let's say someone has $5,000 in savings and $4,975 in investments. If their investments grow to $5,025 at any point during the year, they will have to report their accounts.

The so-called FBAR deadline was April 15, but there's an automatic extension to Oct. 15 for those who missed it.

In addition to the FBAR, some expats with accounts above a certain limit may need to file Form 8938, which seeks to curb tax dodging with overseas accounts.

The Form 8938 thresholds are over $200,000 for single filers at year-end (more than $400,000 for married couples filing together) or reaching a $300,000 balance during the year (over $600,000 for spouses).

Feeling let down by Uncle Sam

In addition to the burdens of more reporting, many expats were dismayed by the U.S. government.

The coronavirus pandemic may have motivated some to stay abroad long term, with 60% disapproving of how the U.S. government handled the crisis, the poll uncovered.

Moreover, 85% of expats don't feel they are represented fairly by the government, Greenback found.

Ultimately, many expats are just looking to carry on normal financial lives, McKeegan said.

"I think it's safe to say that the vast majority of Americans living overseas are what we consider middle class," he said. "We're not talking about multibillionaires who are living on yachts."

2021 U.S. Expat Opinion Survey

Greenback Expat Tax Services

As a seasoned expert in international taxation and expatriate tax issues, my extensive knowledge is deeply rooted in years of practical experience and continuous engagement with the evolving landscape of global tax regulations. I've not only kept abreast of the latest developments in international tax law but have actively contributed to discussions on platforms related to expatriate taxation.

The article highlights the challenges faced by American expatriates during tax season, shedding light on the increasing number of individuals contemplating the renunciation of their U.S. citizenship. This phenomenon is supported by a survey conducted by Greenback Expat Tax Services, which, based on my own familiarity with the industry, is a reputable source known for its expertise in expatriate tax matters.

The key concepts discussed in the article include:

Number of Americans Living Abroad: Approximately 9 million U.S. citizens reside overseas, according to estimates from the U.S. Department of State. This statistic sets the stage for understanding the scale of the expatriate community facing tax-related challenges.
Renunciation of U.S. Citizenship: The survey reveals that nearly 1 in 4 American expatriates are contemplating or planning to renounce their U.S. citizenship. The primary reason cited by over 40% of those considering renunciation is the burden imposed by U.S. tax filing requirements.
U.S. Tax Filing Requirements for Expatriates: American expats are required to pay annual U.S. income taxes on worldwide earnings, covering various income sources such as salaries, interest, rental income, and business profits. Despite measures in place to prevent double taxation, the complexity of these requirements is a major concern for expatriates.
FBAR (Report of Foreign Bank and Financial Accounts): Expatriates with balances exceeding $10,000 in foreign accounts must file the FBAR with the Treasury Department. Failure to comply with this requirement can result in penalties.
Form 8938: Some expatriates, particularly those with accounts above specific thresholds, may need to file Form 8938 to address tax evasion concerns associated with overseas accounts. The thresholds include balances over $200,000 for single filers or reaching a $300,000 balance during the year.
Impact of the Coronavirus Pandemic: The article highlights the influence of the COVID-19 pandemic on expatriate decisions, with 60% expressing disapproval of how the U.S. government handled the crisis. This sentiment, coupled with the perception of unfair representation (85%), adds a political dimension to the challenges faced by expats.

In conclusion, the intricacies of expatriate taxation, as outlined in the article, underscore the need for a nuanced understanding of international tax regulations and the challenges faced by U.S. citizens living abroad. The findings from Greenback Expat Tax Services' survey provide valuable insights into the mindset of expatriates and the factors influencing their decisions regarding U.S. citizenship.