How Much Is Expatriation Tax? Can It Be Reduced or Avoided? (United States Expatriation Tax Rate)
Channel: Esquire Group
Date: 2022-08-24

How Much Is Expatriation Tax? Can It Be Reduced or Avoided? (United States Expatriation Tax Rate)

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Understanding how to reduce (or potentially eliminate) your expatriation exit tax could be the deciding factor in whether or not you remain a US citizen. In this video, I discuss the primary strategies used to avoid or reduce the so-called exit tax that might apply when someone renounces their US citizenship or terminates their long-term US residency.

The so-called exit tax applies to “covered expatriates.” Covered Expatriates include those with a net worth of $2 mil or more, average annual income tax in excess of $178,000 (over the 5 years prior to the year of expatriation) (2022 amount), and those not in tax compliance. Everyone else is a “non-covered expatriate.”

The exit tax has two primary components:

1. Mark-to-market tax on unrealized gains - essentially, you’re treated as though you sold all assets you own for fair market value on the day before expatriation. While certain restrictions apply, most expatriates can take advantage of the full $767,000 (2022 amount) gain exclusion that is tax-free. 

2. Deferred compensation items (like a traditional IRA) are generally treated as distributed on the day before expatriation. 

Here, I focus on the mark-to-market component. Put simply, you can reduce or potentially eliminate your exit tax by reducing the amount of wealth that is included in your wealth calculation. 

There are 5 main strategies for reducing or potentially limiting your exit tax liability, and I will be covering them in this video.

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Website: https://esquiregroup.com

About Jimmy Sexton:

Hi! I am Jimmy Sexton, LL.M. - Founder & CEO of Esquire Group. I founded Esquire Group with the objective of helping and inspiring wealthy families, investors, entrepreneurs, and high-level executives obtain and gain control over and protect their wealth, via strategic wealth planning.

Connect with me on LinkedIn: https://www.linkedin.com/in/jimmysextonllm/

Disclaimer:

This video is prepared for educational purposes only. This video is not legal, tax or any other type of advice. Each individuals’ circumstances are different, you should seek legal and/or tax advice to address your specific situation and any questions you may have.