US Exit Tax Calculator 2026

The US exit tax is the charge imposed by section 877A when a covered expatriate gives up US citizenship or ends long-term permanent residence. You are treated as having sold all of your worldwide property at fair market value on the day before you expatriate, and the resulting net gain above an annual exclusion is taxed on your final return. Certain pensions and tax deferred accounts are dealt with under separate rules rather than the deemed sale.

Only covered expatriates. That means a US citizen who renounces, or a long-term resident who ends green card status, and who also meets at least one of three tests: a net worth of $2 million or more on the expatriation date, an average annual net income tax liability above the indexed threshold for the five preceding years, or a failure to certify five years of full US tax compliance on Form 8854. If none of the three applies, there is no exit tax, although Form 8854 must still be filed.

For expatriations in calendar year 2026 the average annual net income tax threshold is $211,000 and the exclusion from the deemed-sale gain is $910,000, both set by IRS Revenue Procedure 2025-32. The net worth threshold is $2 million, a figure written into the statute that has never been adjusted for inflation. The comparable 2025 figures were $206,000 and $890,000.

It is about your tax, and the distinction matters. The test looks at your average annual net US income tax liability for the five tax years ending before the expatriation date, after foreign tax credits. An American in Britain with a very high salary can therefore sit far below the threshold, because UK tax credited on Form 1116 has already reduced the US liability towards nil. The net worth test is the one that catches most high earners abroad.

Each asset is treated as sold at fair market value on the day before expatriation. The gains are totalled, the exclusion of $910,000 for 2026 is allocated across the gain assets in proportion to each gain, and what remains is taxed as long-term or short-term capital gain according to how long each asset was held. The present value of ineligible deferred compensation and the balance of specified tax deferred accounts are then added as ordinary income. The calculator above runs those steps in the same order as Form 8854.

Broadly everything you own worldwide, valued as it would be for transfer tax purposes on the expatriation date: property, investment portfolios, business interests, cash, pension rights and beneficial interests in trusts. Liabilities are deducted. A UK home with a modest mortgage and a workplace pension are often enough, on their own, to carry an American in London over the line without any sense of being wealthy.

It applies to long-term residents, meaning anyone who held lawful permanent residence in at least eight of the fifteen tax years ending with the year the status ends. Part years count as full years, so someone who received a green card late in one year and gives it up early in another can reach eight sooner than expected. A long-term resident who meets one of the three covered expatriate tests is taxed in exactly the same way as a renouncing citizen.

Yes. A long-term resident who is treated as a resident of the United Kingdom under the treaty tie-breaker, does not waive the benefits of the treaty and notifies the IRS on Forms 8833 and 8854 is treated as having ended permanent residence for tax purposes. That is an expatriation event even though the physical green card is still valid. Britons returning home who file a treaty-based return without modelling this first can trigger the deemed sale by accident.

There is a narrow one. If you became a citizen of both the United States and another country at birth, you remain a citizen of and are taxed as a resident of that other country, and you were a US resident for no more than ten of the fifteen tax years ending with the year of expatriation, the net worth and tax liability tests do not apply to you. A second exception covers those who renounce before age eighteen and a half with no more than ten years of US residence. Neither removes the certification test.

You are a covered expatriate regardless of your wealth. The certification on Form 8854 is made under penalty of perjury and covers every federal tax obligation for the five preceding years, including information returns such as foreign account and foreign company reporting. This is why bringing past filings up to date before the expatriation date, rather than after it, is the first step in any renunciation plan.

Pensions are deferred compensation items and fall outside the deemed sale. Where the payer is a US person and you notify them on Form W-8CE, the item is eligible: nothing is taxed at exit, but 30% is withheld from each taxable payment afterwards and you waive any treaty reduction. Where the payer is not a US person, which is the usual position for a UK workplace or personal pension, the item is ineligible and the present value of your accrued benefit is treated as received on the day before expatriation.

They are individual retirement arrangements, health savings accounts, education savings accounts and similar vehicles. A covered expatriate is treated as receiving a distribution of the entire interest on the day before expatriation, which is taxed as ordinary income to the extent it would have been taxable on a real withdrawal. The statute disapplies the early distribution penalty on that deemed distribution.

You can elect, asset by asset, to defer the tax on the deemed sale until the property is actually sold. The election is irrevocable, interest runs throughout, you must provide adequate security such as a bond or letter of credit, appoint a US agent, and irrevocably waive any treaty right that would prevent assessment or collection. Deferral aligns the US charge with a later real disposal, which can be valuable where another country will tax the same gain at that point.

Often, yes. For property you already owned on the day you first became a US resident, your basis for the deemed sale is treated as not less than its fair market value on that date. Only growth during your US years is then within the charge. The rule is automatic unless you elect out of it, and it does not apply to US real property or to assets used in a US business. Britons who arrived with an existing portfolio should enter the stepped-up figure as their basis above.

No. The exit charge is a fiction of US law, and nothing is actually disposed of. For UK capital gains tax your base cost stays at what you originally paid, so if you later sell the same asset while UK resident, Britain computes its tax on the whole gain at 18% or 24% for 2026/27. The same growth can therefore be taxed by the United States at exit and by the United Kingdom on sale, in different years, unless the sequencing is planned in advance.

It should not be assumed. Relief depends on the source of the gain, the treaty position at each date and the gap in time between the two charges, and the result differs between asset classes. The practical tools are the deferral election, which moves the US charge to the year of the real sale, selling before expatriation so that both countries tax a single real event, or using the UK four-year foreign income and gains regime where you qualify for it.

An individual who becomes UK resident after at least ten consecutive tax years of non-residence can claim relief on foreign income and gains arising in their first four years of residence. For a Briton leaving the United States after a long stay, a real sale of non-UK assets inside that window can be free of UK tax, leaving only the US charge. The relief must be claimed, it costs you the personal allowance and the capital gains annual exempt amount for the year, and it does not cover UK-situated assets.

The year of expatriation is normally a dual-status year: a resident for the part up to the expatriation date and a nonresident afterwards. A dual-status taxpayer generally cannot file a joint return, cannot use head of household rates and cannot claim the standard deduction. That is why this calculator offers only single and married separate rates and asks for your other income after deductions rather than applying a standard deduction for you.

Form 8854 is the initial and annual expatriation statement. It establishes your expatriation date for tax purposes, carries the compliance certification, and reports the deemed sale. It is attached to your income tax return for the year of expatriation and filed by that return’s due date, including extensions. Until it is filed you have not completed the tax side of expatriation, and the penalty for failing to file, or for filing it incomplete or incorrect, is $10,000.

It uses the 2026 thresholds and rate bands from IRS Revenue Procedure 2025-32, allocates the exclusion across gain property in the way Form 8854 requires, stacks long-term gain on top of ordinary income, and adds the 3.8% Net Investment Income Tax on the taxable gain. It does not model interests in nongrantor trusts, passive foreign investment company or controlled foreign corporation rules, depreciation recapture, the alternative minimum tax, foreign tax credits against the deemed gain, or state tax. Treat the result as a well-founded planning figure and let our specialists prepare the filed numbers.