Section 349(a)(5) of the Immigration and Nationality Act details the right of a US citizen to renounce his citizenship by “making a formal renunciation of his nationality before a diplomatic or consular officer of the United States in a foreign state, in – such a form. as may be prescribed by the Secretary of State’ and by signing an oath of renunciation.

The government maintains a federal registry of people who have renounced their citizenship. In the report issued in October 2023, the list of names spanned 12 pages. The report published in October 2024 has since doubled in size to 30 pages. Why would anyone renounce their US citizenship?

The process and impact of expatriation

Abandoning citizenship has serious consequences. You waive various rights, including:

• The right to vote in US elections
• Government protection
• Assistance during trips abroad
• Citizenship for children born abroad
• Access to federal jobs
• Unrestricted travel in and out of the US

Waiver is a lengthy legal process involving paperwork, interviews and money. Due to the increase in the number of US citizens wanting to opt out, the US State Department has increased the opt-out fee from $450 to $2,350, about five times the average cost in other high-income countries such as the United Kingdom United. In addition, some high-income citizens may owe a type of capital gains tax called an “exit tax” (officially called a expatriation tax).

Importantly, renunciation of US citizenship is almost always irreversible. Once you renounce, you cannot easily regain your citizenship. Despite these (and other) consequences, more and more people are choosing to renounce their US citizenship. Here’s why.

Why so many quits?

Although the reasons for renouncing citizenship vary from person to person, the recent increase in numbers is mainly due to newer tax laws, including Foreign Account Tax Compliance Act (FATCA) of 2010. right Internal Revenue Service (IRS), FATCA is “an important development in US efforts to combat tax evasion by US account holders and other financial assets offshore.”

FATCA requires reports on the following:

• US taxpayers about their foreign financial accounts and offshore ActiveE
• Foreign financial institutions regarding financial accounts held by US taxpayers
• Foreign entities in which US taxpayers own a substantial interest

Under FATCA, certain US taxpayers with non-US financial assets totaling more than the reporting threshold must report their assets to the IRS using Form 8938, Statement of Specified Foreign Financial Assets (threshold varies by your file status and whether you live in the US or abroad).

The IRS warns that there are “serious penalties for not reporting these financial assets.” It should be noted that The FATCA requirements are in addition to Form 114, Report of Foreign Bank and Financial Accounts (FBAR), which is the longstanding requirement for reporting foreign financial accounts. Penalties for non-compliance are significant and sometimes involve criminal liability.

The US tax system and its global impact

Unlike most countries, the US taxes its citizens on worldwide income, meaning that US citizens are taxed on their income no matter where they live in the world. while foreign tax credits can alleviate this burden, not eliminate it double taxationespecially for higher earners who file and pay taxes in both the US and their country of residence.

The complexity and cost of complying with these tax laws can be overwhelming, prompting some Americans to renounce their citizenship to escape these obligations. In addition, FATCA made it more difficult for US citizens living abroad to access banking services. Many foreign banks now refuses to open accounts for Americans because of reporting requirements, causing frustration for those living abroad.

The rise of nomadic lifestyles

The global pandemic has accelerated the trend of digital nomadism— the lifestyle of working remotely while constantly traveling and living in different countries. According to MBO Partners, the digital nomad population in the US grew by nearly 50% from 2019 to 2020.

This lifestyle can make navigating the bureaucratic and legal complexities of U.S. citizenship more difficult. Some digital nomads renounce citizenship as a way to avoid residency requirements in certain countries that might otherwise force them to choose one nationality over another.

Although these statistics do not indicate those leaving the US for this type of lifestyle, they support the idea that the adoption of the nomadic lifestyle has been on the rise and may perpetuate the renunciation of US citizenship.

Dual citizenship

Dual citizenship may create conflicts, such as when the legal systems of two countries require conflicting legal obligations. This could be due to military service obligations, taxes or legal policies. For some people, renouncing their US citizenship is a practical way to resolve these conflicting loyalties and simplify their lives.

In 2023, the US naturalized 878,500 new citizens. Many of these individuals may have maintained dual citizenship with their countries of origin. Over time, some may choose to give up one nationality in favor of the other, especially if they find the US tax system or navigating bureaucratic complexities too burdensome.

Other reasons for opting out

While tax laws and dual citizenship are the main causes of renouncing US citizenship, there are other more personal reasons as well. Historically, some Americans renounced their citizenship due to opposition to US government policies, such as during the Vietnam War.

Certain acts can also cause a person to lose their US citizenship without formally renouncing it. Under Internal Revenue Code and the Immigration and Nationality Act (found in Title 8 of the United States Code), citizenship can be terminated (and therefore gave upwithout opting out) for a number of reasons, including:

• Applying and becoming a naturalized citizen of another country (except for dual citizenship)
• Take an oath of allegiance to another country
• Joining the armed services of another country engaged in a war against the US or joining the armed services of another country as an officer
• Working for a foreign government while being a citizen of that county
• Acceptance of employment by a foreign government in a job where an oath of allegiance, affirmation, or other formal declaration of faith is required
• Renunciation of US citizenship in time of war with the approval of the US Attorney General
• Committing an act of treason or attempting to overthrow the US government by force (and conviction by court-martial or civilian court)

conclusion

Today, tax laws lead to a record number of people renouncing their US citizenship each year. However, it’s not as easy as putting your passport through the shredder. Because the law requires those who wish to renounce their U.S. citizenship to do so in person before a U.S. consular or diplomatic officer while in a foreign country, U.S. citizens cannot renounce their citizenship by mail, through a tertor while in the United States.

Opting out has significant consequences. In addition to renouncing benefits granted to US citizens, the US State Department advises that anyone considering renouncing US citizenship should understand that the act is irrevocable in almost all cases. Renouncing one’s citizenship is one of the most solemn decisions anyone can make. Carefully weigh the pros and cons for you and your family. It is also recommended that you consult with an experienced tax professional to understand the tax consequences of opting out.