Why 1 in 4 Expats Is Considering Giving Up Their U.S. Citizenship

2025-08-12 14:35:36

One in four expats is thinking about giving up U.S. citizenship. Taxes, FBAR stress, and compliance costs are major reasons.

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Is the American Dream Still Worth It — Abroad?

Many Americans living overseas used to see their U.S. citizenship as a badge of pride and protection. But in recent years, that sentiment has changed. A growing number of U.S. expats — nearly 1 in 4 — have either considered renouncing their citizenship or taken steps to do so.

So what’s driving this shift? It mostly comes down to tax obligations, foreign bank reporting rules, and the emotional weight of feeling like you’re always looking over your shoulder for the IRS — even if you haven’t lived in the U.S. for years.

The Reality of Being a U.S. Expat

Unlike most countries, the U.S. taxes its citizens on worldwide income, regardless of where they live. So even if you’ve lived in Paris for 10 years, run a local business, and haven’t stepped foot on U.S. soil in ages — you’re still expected to file:

• A U.S. tax return every year (Form 1040)
  
  

• An FBAR (FinCEN Form 114) if your foreign bank accounts ever total $10,000+
  
  

• Possibly Form 8938 for foreign assets
  
  

• And more, depending on your situation
  
  

It’s a compliance burden that expats in other countries rarely face.

The Emotional and Financial Toll

For many U.S. expats, it’s not just about the time spent gathering paperwork or the fees paid to tax professionals. It’s the constant anxiety of doing something wrong — or missing a form you didn’t even know existed.

Let’s break down the common pain points:

1. FBAR Reporting

The Foreign Bank Account Report (FBAR) is infamous among U.S. expats. If your combined foreign accounts exceed $10,000, you must file — even if you didn’t earn a penny of interest. And the penalties? They can reach up to $10,000 per violation (non-willful) and $100,000+ or 50% of the account (willful).

2. Cost of Filing

Many expats need to hire a cross-border tax expert just to stay compliant. Fees can easily reach $1,000 to $3,000+ per year — just to file taxes you might not even owe.

3. Double Taxation Confusion

Yes, tax treaties and foreign tax credits help, but they don’t always eliminate double taxation — especially for things like self-employment taxes, investment income, or retirement contributions.

4. Banking Problems Abroad

Some foreign banks refuse to work with Americans because of FATCA (Foreign Account Tax Compliance Act), which requires them to report U.S. account holders to the IRS. Many expats have been denied mortgages, investment accounts, or even standard checking accounts.

What the Numbers Say

According to surveys and government data:

• Over 9 million U.S. citizens live outside the U.S.
  
  

• Roughly 25% of expats say they’ve seriously considered renouncing their citizenship
  
  

• The number of actual renunciations peaked in recent years — and while COVID slowed it down, interest remains high
  
  

What Does Renunciation Involve?

Giving up U.S. citizenship is a big step. Here’s what it typically looks like:

1. Appear in person at a U.S. embassy or consulate
   
   

2. Pay a $2,350 renunciation fee
   
   

3. File Form 8854 to formally exit the U.S. tax system
   
   

4. If you’re considered a “covered expatriate”, you may owe an exit tax on your worldwide assets
   
   

Not everyone is subject to the exit tax, but the rules can be complicated. The IRS considers things like:

• Average tax liability over the past 5 years
  
  

• Net worth of $2 million or more
  
  

• Failure to file 5 years of tax returns
  
  

Why People Still Don’t Renounce

Despite the burden, many expats don’t want to let go of their U.S. passport. Here’s why:

• Travel freedom: U.S. citizenship grants visa-free access to many countries
  
  

• Fear of regret: What if you want to move back one day?
  
  

• Family ties: Aging parents, children, or future plans in the U.S.
  
  

• Cost of tax advice: Some simply don’t know how to renounce properly
  
  

For these reasons, some expats stick with compliance — no matter how frustrating.

Alternatives to Renunciation

If you’re not ready to give up your citizenship, here are some options that can help reduce the pain of compliance:

Use the Foreign Earned Income Exclusion (FEIE)

You can exclude up to $120,000+ of foreign-earned income from U.S. taxation if you pass either the bona fide residence or physical presence test.

Claim Foreign Tax Credits

These help offset U.S. taxes with what you’ve already paid abroad — useful if you live in a high-tax country.

Stay on top of FBAR deadlines

Use tools and reminders to make sure your FinCEN Form 114 is filed on time each year.

Consider Streamlined Filing

If you’re behind on your U.S. taxes or FBARs and your noncompliance was non-willful, the Streamlined Filing Compliance Procedures may help you catch up without penalties.

Final Thoughts: Is It Worth It?

Every expat’s situation is different. For some, the cost and stress of compliance are too much — and renunciation feels like the only solution. For others, maintaining U.S. citizenship, even with the hassle, is still worth it.

But one thing is clear: taxes are a major pain point for Americans abroad. And the fact that 1 in 4 expats is considering such a drastic move speaks volumes.

FAQs

Q: Does the U.S. really tax citizens who live abroad?
Yes. The U.S. is one of only two countries that taxes based on citizenship, not residency.

Q: If I renounce, do I still owe U.S. taxes?
Not after you officially renounce and file Form 8854 — unless you’re subject to the exit tax.

Q: Can I get my citizenship back later?
Renunciation is permanent. You would need to go through the U.S. immigration process like any other foreign national.

M.Daniyal