For individuals with dual or multiple citizenships, the decision to renounce U.S. citizenship can be particularly complex. It involves not only legal and administrative steps, but also a nuanced understanding of how tax obligations and residency laws across jurisdictions may interact. If you hold more than one nationality and are contemplating expatriation, this article provides a foundational guide to help you navigate the decision.

Understanding Dual Citizenship

Dual citizenship refers to the legal status of a person who is a citizen of two countries simultaneously. While the U.S. government recognises dual nationality, it does not encourage it, as it can create competing obligations and potential conflicts in taxation, military service, and other civic duties.

In the context of renouncing U.S. citizenship, holding another nationality is not just common – it is essential. The U.S. requires that individuals already hold another citizenship before renunciation to avoid statelessness.

Legal Considerations Before Renouncing

Before initiating the renunciation process, dual citizens should:

• Confirm their legal status in their non-U.S. country: Ensure that citizenship is active and recognised, with valid travel documents (e.g., passport).
• Understand the residency and entry implications: Losing U.S. citizenship means giving up the automatic right to live and work in the U.S., and may require visas for future travel.
• Check local laws: Some countries do not allow dual citizenship or may interpret renunciation as an abandonment of loyalty. Confirm how your non-U.S. country treats renunciation of another nationality.

Tax Considerations for Dual Citizens

Renouncing U.S. citizenship doesn’t immediately cut off U.S. tax obligations. The Internal Revenue Code imposes an exit tax on certain individuals deemed “covered expatriates.” This applies if any of the following are true:

• Your average annual net income tax liability over the prior five years exceeds a set threshold (USD $209,000 in 2025).
• Your net worth is USD $2 million or more.
• You fail to certify, under penalty of perjury, that you’ve complied with U.S. tax obligations for the five preceding years.

Covered expatriates are subject to a deemed sale of their worldwide assets on the day before renunciation, which may result in significant capital gains tax. Special rules may apply to retirement accounts, deferred compensation, and certain trusts.

Implications for Dual Citizens Abroad

If you’re already living outside the U.S., renunciation may appear to offer tax simplification. However, dual citizens should consider:

• Foreign tax residency rules: Ensure your new home country won’t treat the deemed gains or asset transfers from exit tax as taxable locally.
• Information reporting obligations: Even after renunciation, if you’re deemed a covered expatriate, you may face ongoing filing requirements, particularly around gifts and bequests to U.S. persons.
• Banking and investment access: Some financial institutions may treat former U.S. citizens differently, particularly under FATCA-related scrutiny.

Key Steps and Considerations

Seek legal and tax advice early: before beginning the renunciation process, ensure you’re compliant with both U.S. and foreign obligations.

Document your tax history: prepare accurate filings for the last five years to avoid covered expatriate status where possible.

Evaluate family impacts: especially if you have U.S. citizen children or relatives who may be affected by your expatriation.

Keep long-term goals in view: consider how renunciation affects travel, inheritance, retirement, and financial access.

Final Thoughts

For dual citizens, the decision to renounce U.S. citizenship is rarely straightforward. It requires balancing legal eligibility, cross-border tax exposure, and long-term personal and financial goals. While the benefits may include streamlined tax reporting and simplified residency ties, the risks – especially for high-net-worth individuals – can be significant.

The information in this blog post is for general informational purposes only and does not constitute professional tax advice. We strongly recommend consulting a qualified tax professional before making any decisions. US Expat Tax Advisor is not liable for any actions taken based on this content.

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