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ARTICLE · 06 MARCH 2015

Relief For Dual Citizens Expatriating?

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An individual may become a US citizen at birth by being born within the US or by having a US citizen parent.

United StatesTax
Stephen Nerland
Stephen Nerland
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An individual may become a US citizen at birth by being born within the US or by having a US citizen parent. All US citizens are subject to US federal income taxation on their worldwide income, even if they reside in a foreign country. On the other hand, an individual who is non-resident for US federal income tax purposes is only subject to US federal income taxation on certain income from US sources and income that is effectively connected to a US trade or business.

If an individual renounces his or her US citizenship, he or she may be required to pay a mark-to-market exit tax on a deemed disposition of his or her worldwide assets. The former citizen is subject to this exit tax if he or she meets one of the following three tests: (1) has an average annual net income tax liability for the five taxable years preceding the year of expatriation that exceeds a specified amount (adjusted for inflation, $160,000 in 2015) (the 'tax liability test'), (2) has a net worth of

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