Race to Get Out: Taxes May Be Why Americans Give Up Citizenship at Record Rates

Posted: August 12, 2016 in Uncategorized
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The number of Americans giving up their citizenship continues to rise. The reason? America’s convoluted tax codes.

In 2015, 4,279 Americans renounced their citizenship, in a move the US Treasury Department defines as “choosing to expatriate.” Of those, 461 “expatriated” during the second quarter. This broke the US record for the third consecutive year.

So far, 2016 looks like it’s on track to break the record again. In this year’s second quarter, 504 Americans surrendered their passports. On top of the 1,158 who did the same in the first quarter, 1,662 US citizens have expatriated to date in 2016.

While the US Treasury has not tendered an explanation for the surge, financial experts believe it involves taxes.

“There’s a lot of them who are tired of the hassle and headache and expense of complying with US tax rules,” tax lawyer Max Reed tells Fortune.

“Most of them are US citizens who’ve lived abroad for a long-time.”

While most countries tax their citizens based on residence, the US is one of the few nations that taxes based on citizenship. US citizens residing abroad must still pay US taxes. Failure to do so can result in penalties in excess of $100,000.

Still, if you’re only renouncing your citizenship because of tax reasons, you’re going to have to jump through even more financial hoops. The formal paperwork can be time consuming, and ultimately results in an exit tax of $2,350.

Of course, with the US election coming up, many may feel that, given the choice between former Secretary of State Hillary Clinton and billionaire Donald Trump, the best option is simply to cut and run.

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