Relinquishing Citizenship

30 Apr

I’ve seen quite a few articles popping up lately about Americans overseas relinquishing their US citizenship, usually for tax reasons.

In America, the tax code is complicated enough even when you don’t have any special circumstances to consider. For Americans living and working abroad, I’m told it can be absolutely hellish to try to keep up with all the ever-changing tax rules and that heavy penalties apply if you get it wrong.

And there are not a lot of accountants who specialise in foreign tax law, either. Mine told me this year that if I start earning foreign income, I will have to find another accountant because his firm isn’t equipped to deal with that sort of scenario.

I do know that you have to report all your foreign income, though you don’t necessarily have to pay an income tax on it below a certain threshold. You also have to report all your foreign assets, for example, a home owned jointly with your spouse or any bank accounts on which you have signatory power, even if the income in it is entirely your spouse’s and you haven’t earned a single cent that went into it.

It’s very intrusive, especially having to report the income of your non-citizen spouse who really oughtn’t have to disclose any of their assets to a foreign government.

I can see why some people would consider giving up their citizenship, especially if they have a second citizenship and never plan to return to live in the US.

Although, I’ve also heard people talk about an exit tax, where the government claims something like 50% of your US assets. I don’t know if that applies to everybody or just people who are rich enough, but either way, the whole business stinks. But I guess America needs money so the government can afford to continue its warmongering and the like.

I’ve also heard that you have to continue filing tax returns for ten years after giving up your citizenship.

I read an article today that a friend shared with me about people being bullied and intimidated when they go to relinquish their citizenship and about someone who was denied his request to give up his citizenship (the article doesn’t state the reason for that).

There is so much information out there, a lot of it vague or ambiguous, that it makes it hard to know what the real situation is as far as tax requirements and giving up one’s citizenship, but I’ve yet to hear anyone speak positively of it.

So far, my plan is to be a stay-at-home mother, so I’m hoping to avoid a lot of the hassle by not working. I don’t especially want to give up my citizenship because I like having options and I feel like it is important to have a choice of countries to live in. You never know what the economic or political future of any one place might turn out to be and I want to be able to leave a place for greener pastures if need be.

I also like that our children will have access to multiple citizenships, so I plan to keep my citizenship at least long enough for my future children to have access to it if they want it.

But if it becomes too much of a pain in the butt, then after we are done having kids, I might just say to hell with it all and give up my US citizenship.

Do any of you other expats have any thoughts on this issue? Would you consider giving up your citizenship (for any reason) or have you already done so?


5 Responses to “Relinquishing Citizenship”

  1. maggiemyklebust April 30, 2012 at 6:56 pm #

    Wow… I need to think on this awhile…

  2. astimegoesbuy April 30, 2012 at 8:37 pm #

    I run as a dually, US and Australia.
    so far I haven’t had any problems with my taxes because I haven’t earned enough.
    The toughest bit is remembering to do them!
    I thought long and hard about becoming an Australian citizen and would I give up my US citizenship.
    The answer was “NO”. It is my culture, history and part of who I am. I fought for my country and would fight for my new one, but I’m not going to turn my back on it.
    I am proud of where I come from, where I have been and where I am now.
    As I said, it all makes “me”.

  3. Zeta April 30, 2012 at 8:45 pm #

    Because Denmark doesn’t allow dual citizenship, I’ll have to decide at some point, and it makes me so nervous! Knowing about the tax complications definitely pushes me a bit toward giving up my American one sooner rather than later, but like you, I’m a bit reluctant to because I always want the option of going back to live near family if I need to, etc. This one will definitely need a pros and cons list when the time comes…

  4. keepingiteasyandsimple May 12, 2012 at 4:13 am #

    I am not an expat, but I do think relinquishing citizenship is a very big deal. I hate to see someone give it up merely for tax purposes. I view citizenship as a big part of who I am, my heritage, and to say I I am no longer an American would be extremely difficult for me. Before anyone makes such a decision it should be carefully considered because once gone, it is very hard (sometimes impossible) to get it back.

    • housewifedownunder May 14, 2012 at 5:19 pm #

      I guess I have slightly different feelings on the matter. Having traveled so much, I’ve often been in situations where I was downright ashamed to be an American. I’m also not patriotic in the sense that I disagree with the way America behaves on the global stage and I have a serious problem with the fact that I support their activities with my tax dollars. I imagine there may be a day in the future where keeping my US citizenship no longer has any benefit for me and I might want to consider giving it up.

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