For US tax purposes, the term “long-term permanent resident” has a very specific meaning under the expatriation rules of the Internal Revenue Code (IRC) §877(e)(2). It is not simply anyone who holds a green card for a long time. Instead, it refers to a lawful permanent resident (green card holder) who has held that status in at least eight of the last fifteen tax years before giving it up.
How the 8-out-of-15-year test works
Counting years: A year counts as a “year of US residency” if you held a green card for even one day in that calendar year.
Partial years: Even if you became a green card holder in December, that year still counts toward the eight-year total.
This means many green card holders meet the long-term permanent resident definition sooner than they expect.
Why it matters
Once you are a long-term permanent resident, giving up your green card (formally abandoning it or having it revoked) can trigger the US expatriation tax regime if you are a covered expatriate. Covered expatriates are subject to special tax rules, including the possibility of an exit tax.
You are a covered expatriate if you meet any of these tests at the time you expatriate:
Your average annual US net income tax liability for the five years before expatriation exceeds a set threshold ($201,000 in 2024, indexed annually).
Your net worth is $2 million or more.
You fail to certify, under penalties of perjury, that you have complied with all US tax obligations for the five preceding years.
Exit tax consequences
If you are a covered expatriate:
You are deemed to have sold all your worldwide assets the day before expatriation. Gains above an exclusion amount ($821,000 in 2024) are taxable at capital gains rates. Deferred compensation items (such as pensions or stock options) may be subject to immediate withholding or taxation. Certain tax-deferred accounts (like IRAs, HSAs) are treated as if fully distributed the day before expatriation.
Practical considerations before giving up a green card
Plan ahead: Understand your net worth and average tax liability well before you reach the eight-year mark.
Treaty positions: If you qualify as a tax resident of another country under a treaty, formally asserting this may stop your count toward long-term permanent resident status.
Document compliance: Ensure you are up to date on all US tax filings, as failure to certify compliance can make you a covered expatriate regardless of income or net worth.
Final Thoughts
For green card holders, crossing into long-term permanent resident status under IRC §877(e)(2) changes the stakes when giving up US residency. The rules can trigger significant tax consequences, including a potential exit tax. Understanding when and how the eight-year test applies, and planning accordingly, is crucial to avoiding costly surprises.
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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