Expatriation Tax

DEFINITION of 'Expatriation Tax '

An expatriation tax is a tax on someone who renounces their citizenship. In the United States, the expatriation tax provisions under Section 877 and Section 877A of the Internal Revenue Code (IRC) apply to U.S. citizens who have renounced their citizenship, and long-term residents who have ended their U.S. resident status for federal tax purposes. Different rules apply, according to the date upon which one expatriated.

BREAKING DOWN 'Expatriation Tax '

Because many people who expatriated did so to avoid tax laws regarding their assets, the IRS has imposed more severe tax implications for expatriates. The IRS assumes reasons for expatriation is tax avoidance if the person who does it has an annual income over a specified benchmark figure. The ex pat tax does not apply to individuals who can prove in a ruling with the Secretary of Treasury that their reason for expatriation was not to evade taxes, such as a person with dual citizenship choosing the other country for permanent citizenship.

RELATED TERMS
  1. Expatriate

    An individual living in a country other than their country of ...
  2. Citizenship Test

    One of the key criteria set forth by the IRS that a person must ...
  3. Renounceable Right

    An offer issued by a corporation to shareholders to purchase ...
  4. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
  5. Direct Tax

    A tax that is paid directly by an individual or organization ...
  6. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
Related Articles
  1. Taxes

    Why People Renounce Their U.S Citizenship

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  2. Taxes

    The 5 Countries Without Income Taxes

    Discover information on some of the best countries to consider relocating to that offer the financial benefit of charging no income tax.
  3. Personal Finance

    5 Countries Where It's Hardest To Become A Citizen

    The United States is one of five countries that put up very high barriers for foreigners to get citizenship. Here's how it compares to the other four.
  4. Retirement

    5 Countries Where It's Easy to Gain Citizenship To Retire

    Discover five of the countries that make it easiest for you to obtain citizenship and a second passport through residency, investment or other means.
  5. Economics

    5 Hardest Countries For Getting Citizenship

    Achieving citizenship in certain countries, especially these five, is much harder than you might think.
  6. Retirement

    Strategies to Retire Abroad and 7 Countries to Consider

    Not that you always need citizenship to establish a home in a new country. Permanent residency might do just as well.
  7. Taxes

    When Is Dual Citizenship Not A Good Idea?

    It may sound useful, but there are a number of reasons that make dual citizenship a questionable choice.
  8. Taxes

    Is It Smart To Get Dual Citizenship?

    When does it make sense to be a citizen of the U.S. and somewhere else? Here are the plusses and negatives of a dual citizenship.
  9. Economics

    Advantages And Disadvantages Of Dual Citizenship

    A person with dual citizenship is a citizen of two countries at the same time. Dual citizenship is complex, so it’s important to understand the pros and cons.
  10. Personal Finance

    How To Become A U.S. Citizen

    Depending on their parents, people not born in the U.S. either inherit U.S. citizenship or need to achieve it. Here are the steps to become an American.
RELATED FAQS
  1. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  2. What is the justification for allowing deferred tax liabilities?

    Understand the justification for allowing deferred tax liabilities. Learn the reasoning behind why a company would want to ... Read Answer >>
  3. What's the difference between the marginal tax rate system and a flat tax?

    Find out about the difference between marginal tax rates and flat taxes. Gain insights on both systems and the arguments ... Read Answer >>
  4. What is the difference between income tax and capital gains tax?

    Understand the difference between a person's income tax and his capital gains tax. Learn when a person needs to pay taxes ... Read Answer >>
  5. What are the differences between regressive, proportional and progressive taxes?

    Understand the differences between the most common tax systems including regressive taxes, proportional taxes and progressive ... Read Answer >>
  6. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center