How Much Is the US Exit Tax and How Is It Calculated?

The US exit tax applies when you renounce U.S. citizenship or end long-term green card status and qualify as a “covered expatriate.” It treats your worldwide assets as if you sold them the day before you left, excludes the first $910,000 of gain for 2026 expatriations, and taxes the rest at the capital gains rates that would normally apply to each asset. Most people who expatriate never owe it, because you have to cross specific wealth or tax-liability thresholds first. For those who do, the bill can be large: holding appreciated property for decades and then facing a deemed sale of all of it in one day is the whole point of the regime.

Who Actually Owes the Exit Tax

Only “covered expatriates” owe anything. The category includes U.S. citizens who relinquish citizenship and long-term residents who give up their green card.¹ A long-term resident is someone who held a green card during at least eight of the fifteen tax years ending with the year of expatriation. Seven years or fewer in that window and you aren’t a long-term resident, so the exit tax doesn’t reach you at all.

If you’re in one of those two groups, you still have to trip one of three tests to become a covered expatriate:

Net worth test: your net worth is $2 million or more on the date of expatriation.
Tax liability test: your average annual net income tax for the five tax years before expatriation exceeds $211,000 for 2026, a figure adjusted each year for inflation.²
Certification test: you fail to certify on Form 8854 that you’ve met all federal tax obligations for the five preceding tax years.³

Any one test is enough. The certification test is the trap: people well under the monetary thresholds become covered expatriates every year because their past five years of filings weren’t clean and they can’t honestly sign the certification.

How the Tax Is Calculated

The IRS treats every asset you own anywhere in the world as if you sold it for its fair market value the day before your expatriation date.¹ No money changes hands, but the gain between your cost basis and that fair market value becomes taxable. That deemed sale is the mechanism behind the entire exit tax.

For expatriations in 2026, the first $910,000 of total gain is excluded.² Only gain above that threshold gets taxed. The exclusion is allocated proportionally across all assets with gains, so you can’t aim the whole thing at a single appreciated property.

The gain keeps the character it would have in a real sale. Long-term capital gains on assets held more than a year are taxed at 0%, 15%, or 20% depending on your income, and the 3.8% net investment income tax can apply on top. Short-term gains on assets held a year or less are taxed at ordinary income rates. For most appreciated portfolios, the practical ceiling is 23.8%.

A Quick Example

Suppose your worldwide assets carry $4 million in unrealized gains on your expatriation date. The 2026 exclusion shelters $910,000, leaving $3,090,000 subject to tax. If all of that gain qualifies for the 20% long-term rate plus the 3.8% surtax, the bill lands around $734,420. Your actual number will depend on each asset’s holding period, your other income for the year, and your filing status.

Assets That Don’t Follow the Deemed-Sale Math

Retirement accounts, employer plans, and trust interests have their own rules, and they’re often harsher than the mark-to-market regime. The $910,000 exclusion does not apply to any of them.

IRAs, 529s, HSAs, and Similar Accounts

Traditional and Roth IRAs, 529 college savings plans, Coverdell accounts, health savings accounts, and Archer MSAs are treated as if the entire account balance were distributed to you the day before expatriation.¹ The full balance is taxable as ordinary income. The early-distribution penalty for being under 59½ is waived, which is the only break here.

401(k)s and Traditional Pensions

Employer-sponsored plans can qualify as “eligible deferred compensation items” if the plan sponsor is a U.S. person and you properly notify them of your covered expatriate status. In that case the plan pays out normally over time, but the payor withholds 30% of each taxable payment, and you must irrevocably waive any treaty-based reduction of that rate.⁴ If you skip the notification or the plan doesn’t qualify, the entire accrued benefit is treated as distributed on the day before expatriation, the same way an IRA is.

Nongrantor Trusts

If you’re a beneficiary of a nongrantor trust, the trust interest escapes the deemed sale. The IRS waits, and when the trust later distributes to you, the trustee withholds 30% of the taxable portion. The timing is friendlier, the flat rate is not.

Deferring Payment

If you can’t or don’t want to pay the exit tax upfront, you can elect to defer it on an asset-by-asset basis until each asset is actually sold.¹ The election is irrevocable, and the conditions are strict.

You must post adequate security with the IRS, typically a surety bond or an IRS-approved letter of credit.³ You must also irrevocably waive any treaty rights that could block the IRS from assessing or collecting the deferred tax. Interest accrues the entire time, which matters when the deferral runs for years or decades. The deferral ends when you sell the asset or when you die, whichever comes first. If your security ever falls short and you don’t cure it in time, the full deferred amount comes due immediately.

The Tax That Follows Your U.S. Heirs

Being a covered expatriate carries a second cost that outlives the exit tax itself. Any gift or bequest you later make to a U.S. citizen or resident triggers a separate tax, paid by the recipient, not by you.⁵ The rate equals the highest estate and gift tax rate in effect at the time, currently 40%.⁶

The tax only hits amounts above $19,000 in covered gifts or bequests received by any one recipient during a calendar year for 2026.² Transfers already subject to U.S. estate or gift tax are excluded, as are gifts to spouses or charities that would otherwise qualify for a marital or charitable deduction. Foreign gift or estate tax already paid on the transfer reduces what’s owed. U.S. recipients report these transfers on Form 708.⁷ Your U.S.-based family needs to know this exists, because the filing obligation sits with them.

Form 8854 and What Happens if You Don’t File

Every person who renounces citizenship or terminates long-term residency has to file Form 8854, whether or not they owe exit tax.⁸ The initial form attaches to your final U.S. income tax return for the year of expatriation and includes a full balance sheet, the tax-compliance certification, and enough financial detail for the IRS to decide whether you’re a covered expatriate.³ If you elected to defer tax, hold eligible deferred compensation, or are a beneficiary of a nongrantor trust, you also file an annual Form 8854 every year those situations continue.

The penalty for failing to file, filing incomplete information, or filing incorrect information is $10,000 per year, waived only if the IRS finds reasonable cause rather than willful neglect.³ Worse, the IRS will keep treating you as a U.S. citizen or long-term resident for tax purposes until you’ve properly notified both the IRS and the relevant government department of your expatriation.⁸ Skipping the paperwork doesn’t release you from the U.S. tax system. It keeps you inside it.

1
Office of the Law Revision Counsel. 26 USC 877A – Tax Responsibilities of Expatriation
2
Internal Revenue Service. Revenue Procedure 2025-32
3
Internal Revenue Service. Instructions for Form 8854 (2025)
4
Office of the Law Revision Counsel. 26 US Code 877A – Tax Responsibilities of Expatriation
5
Office of the Law Revision Counsel. 26 USC 2801 – Imposition of Tax
6
Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax
7
Internal Revenue Service. Instructions for Form 708 – United States Return of Tax for Gifts and Bequests Received From Covered Expatriates
8
Internal Revenue Service. Expatriation Tax