The exit tax can operate similar to a capital gains tax, he said. Say you bought a home in London for $1 million, and it is now worth $3 million today. As a U.S. citizen, you would be on the hook for capital gains taxes on the sale of that property. The exit tax looks at the asset’s value and assesses taxes as if it were sold.
There are moves that individuals can make to move assets out of their possession in order to fall below the threshold, Ashman said.
But be warned that giving up your U.S. citizenship can also trigger other taxes, he said, for example, if you give a gift to someone in the U.S.
Not everyone who renounces their citizenship is doing so for financial reasons.
“There’s a lot of regular people who exit every day,” Ashman said, including individuals who may have been born in America, but have spent most of their lives in another country. “You hear a lot of anti-Trump rhetoric as well.”
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