A significant number of American expats are considering renouncing their citizenship, with taxes and the current political climate being the top reasons for such a consideration, states a survey by Greenback Expat Tax Services.
The top reason for renouncing citizenship was tax issues, with 40 percent of respondents saying that U.S. taxes are too much of a burden. In addition, 86 percent felt that their tax concerns are less likely to be addressed by the American government compared to citizens living in the country.
The next biggest reason for renouncing citizenship was concern about the current political climate, with 15 percent citing it as a reason for considering citizenship renunciation. Twelve percent cited marrying a non-American citizen abroad, 10 percent said they were disappointed at the direction of U.S. leadership, 10 percent did not feel much of a connection to their homeland, and 8 percent found it difficult working with foreign banks as a U.S. citizen.
American expats have to pay annual income taxes to the U.S. government based on their earnings abroad. This means paying and filing taxes in two countries. Though the United States has measures to prevent double taxation, many expats are opposed to dual tax filing requirements due to the expense and time commitment.
Additionally, some Americans have to report their foreign accounts to the U.S. Department of the Treasury annually through the Report of Foreign Bank and Financial Accounts (FBAR) once the combined value of their accounts exceeds $10,000 at any time of the year. Failure to do so will incur penalties.
“What struck me about this most recent survey was the number of people who feel their concerns are less likely to be addressed than people who live inside the U.S.”
In 2021, 2,426 Americans renounced their citizenship, a far lower number than the record-breaking 6,705 renunciations in 2020. The decline is attributed to the COVID-19 pandemic and the closure of U.S. embassies in several nations.
Forty-six percent of expats disapproved of how Washington handled the pandemic and 33 percent said they’re more likely to live abroad following the pandemic.
According to estimates by the U.S. Department of State, there were around 9 million American citizens living abroad as of 2020. The Greenback survey covered 3,200 U.S. citizens living in 121 countries.
However, the total number of renunciations and the revenue impact of such renunciations remain small, the report had said. “All this together suggests that U.S. citizenship has historically been perceived as valuable by most who hold it, and remains so today.”