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

2025-08-12 13:50:34

 Over 1 in 4 American expats consider renouncing U.S. citizenship. Learn why taxes, FBAR, and offshore rules are pushing many to this decision.

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Giving up a U.S. passport sounds drastic — but for many expats, it’s starting to look like the only way out. A recent survey found that 1 in 4 Americans living abroad are seriously considering renouncing their citizenship. What’s driving this trend? In one word: taxes.

The Survey That Sparked the Conversation

A global poll of over 3,200 U.S. citizens living in 121 countries revealed a clear trend: around 25% are either planning or strongly considering renunciation. The top reason? The complexity, cost, and stress of U.S. tax and financial reporting requirements for those living overseas.

A striking 86% of respondents said they feel the U.S. government prioritizes domestic residents and overlooks Americans abroad. This disconnect — paired with financial burdens — is pushing more expats to a breaking point.

Citizenship-Based Taxation: Why Expats Feel Penalized

The United States is one of only two countries in the world that practices citizenship-based taxation, meaning Americans are taxed on their global income regardless of where they live. Even if you haven’t set foot in the U.S. for years, the IRS still expects a yearly tax return — and possibly a tax payment.

Although tools like the Foreign Earned Income Exclusion (FEIE) and foreign tax credits exist, navigating them isn’t easy. Most expats need help from specialized tax professionals, often spending hundreds or thousands of dollars each year just to stay compliant.

It’s not just about the money — it’s the hours spent gathering documents, the risk of costly errors, and the sense of being constantly under scrutiny. According to the survey, 4 in 5 expats think it’s unfair they must deal with U.S. tax rules while living and paying taxes abroad.

The FBAR Problem: A Separate Filing With Serious Penalties

The Foreign Bank Account Report (FBAR) is another major stressor. If your combined foreign account balances exceed $10,000 at any point during the year, you’re required to file FinCEN Form 114 annually.

This requirement often catches unsuspecting Americans off guard. Many don’t realize that everyday accounts — a checking account here, a joint savings account there — can easily cross the threshold. The form doesn’t involve additional taxes, but the penalties for not filing are severe:

• Up to $10,000 per non-willful violation
  
  

• Up to 50% of the account balance per year for willful violations
  
  

Many expats first hear about the FBAR after missing several years, which can trigger panic and massive fines. The process of reporting isn’t intuitive either: it involves tracking peak balances, exchange rates, and detailed account info.

One survey respondent described it as “stepping on a landmine of paperwork and penalties.” That sense of being trapped — comply or risk devastating fines — drives many to reconsider their relationship with the U.S. government.

A Look at the Numbers: Renunciations Are Climbing

U.S. citizenship used to be considered an asset. But the rising number of renunciations suggests a shift. In 2020, a record 6,705 Americans officially gave up their citizenship — a sharp spike compared to previous years. While the numbers dropped slightly in 2021 and 2022 (due partly to COVID-related consulate closures), interest hasn’t slowed.

There’s a clear connection between new laws and rising renunciations. In particular:

• The FATCA law, passed in 2010, requires foreign banks to report American accounts to the IRS
  
  

• FBAR enforcement has become more aggressive, with high-profile penalties making headlines
  
  

• Many foreign banks now refuse to work with U.S. citizens due to FATCA reporting obligations
  
  

For many, the hassle outweighs the passport’s benefits — especially if they no longer have strong ties to the U.S.

It’s Not Just About Money: Emotional Strain and Disconnection

Beyond the tax headaches, many expats describe feeling invisible to the U.S. government. Benefits like stimulus checks during the pandemic were harder to access from abroad. Certain financial services — including some banking, investment, and retirement options — are also blocked or limited due to U.S. regulations.

FATCA has made it harder to open or maintain accounts in many countries, with some foreign banks outright refusing to work with Americans. Add to that the lack of political representation — and the feeling that their voices don’t count — and you get a community that feels ignored unless the IRS needs something.

One expat put it bluntly: “I love my country. But the tax rules have made my life miserable. I gave up my passport because it was the only way to move on.”

Calls for Reform: Will Washington Listen?

Groups like American Citizens Abroad (ACA) have been working to raise awareness and push for change. Their main proposal: switch from citizenship-based to residence-based taxation, so only Americans living in the U.S. pay U.S. taxes.

While the idea has gained some attention in Congress, no major reforms have passed yet. In the meantime, advocacy groups continue to promote tax simplification measures, streamlined filing for overseas taxpayers, and relief from overlapping reporting requirements like FBAR and FATCA.

Whether these efforts will succeed is unclear. But the trend is unmistakable: as long as compliance remains this burdensome, more expats will look toward renunciation.

What to Know Before You Renounce

Renouncing U.S. citizenship isn’t a casual decision. It involves:

• An in-person appointment at a U.S. embassy or consulate
  
  

• A $2,350 fee
  
  

• Potential exit tax if your net worth or average annual tax exceeds certain thresholds
  
  

If you're considering it, it’s important to speak with an experienced tax advisor and weigh both financial and emotional implications.

Some expats explore alternatives first, such as amending past filings, entering streamlined compliance programs, or reducing their U.S. footprint without giving up citizenship.

Final Thoughts: The Hidden Cost of the Blue Passport

For many U.S. citizens abroad, holding onto their American passport has become a financial liability rather than a source of pride. The survey data is clear: roughly one in four expats feels pushed to consider renunciation because of tax reporting rules that feel disconnected from their lives.

Until meaningful reform happens, these numbers are likely to grow — and the debate around U.S. citizenship-based taxation won’t be going away anytime soon.

M.Daniyal