Over the past few years, many U.S. citizens living in Canada have considered renouncing their U.S. citizenship, driven in part by political decisions, including those made under President Donald Trump. While the decision to renounce U.S. citizenship is deeply personal and complex, it’s often motivated by frustration with tax policies, international financial obligations, and a desire for more autonomy. If you’re a U.S. citizen living in Canada and are considering this route, we’ll provide practical insights into how to navigate the renunciation process, what it means for your taxes, and how Bordera Tax and Immigration Law can help. Contact us today for expert advice on renouncing your U.S. citizenship.
For many, the policies implemented during Donald Trump’s presidency prompted a rethinking of their ties to the U.S. The U.S. tax system requires its citizens—regardless of where they live—to file annual tax returns and report global income. This policy is often a burden for those living outside the U.S., especially if they have substantial financial ties in their country of residence, such as Canada.
Issues like the imposition of higher FATCA (Foreign Account Tax Compliance Act) reporting requirements and the overhaul of the tax code left many Americans abroad feeling alienated. The requirement to file U.S. taxes each year—despite also paying Canadian taxes—has become an ongoing concern. For some, renouncing U.S. citizenship has been seen as a way to escape these complicated, and, at times, punitive, regulations.
Renouncing U.S. citizenship isn’t as simple as just turning in your passport. The U.S. imposes a specific tax regime known as “exit tax” for certain individuals who renounce their citizenship. This tax is intended to ensure that individuals do not avoid paying U.S. taxes by renouncing their citizenship while holding on to valuable assets.
If you have a net worth over $2 million or have had an average income tax liability of more than $201,000 for the past five years, you may be subject to the expatriation tax. This means that you could be required to pay taxes on unrealized gains from certain assets (such as investments or real estate) at the time of renunciation. Many of our clients have assumed that they are not even close to meeting any of these requirements but are surprised when they calculate their net worth under IRS rules. For example, a homeowner in Vancouver or Toronto may easily meet the $2 million threshold. For many individuals, this tax is a significant factor to consider. However, it’s important to note that there are strategies to minimize or even avoid this tax, depending on your specific situation.
While the U.S. imposes taxes on its citizens, Canada also has its own set of rules for individuals who renounce U.S. citizenship. Canada allows individuals to renounce their foreign citizenship, but the tax implications can be complex. You’ll need to work closely with a tax professional to ensure that you understand the potential impacts on your Canadian tax filings, as well as any implications for your Canadian assets or estate planning. For example, one of the most common concerns among those renouncing their U.S. citizenship is whether they’ll still be required to pay capital gains taxes on certain assets.
Renouncing U.S. citizenship can offer significant financial relief, especially if you’re facing high compliance costs related to filing U.S. taxes every year. However, it’s not the right decision for everyone. For example, if you have business interests or investments in the U.S., renunciation may not be the best option for you.
That’s why it’s crucial to have the guidance of a knowledgeable lawyer who will take a balanced approach to evaluating your situation. Bordera Tax and Immigration Law can help you weigh the pros and cons, calculate potential exit tax liability, and assist in navigating both the Canadian and U.S. tax laws.
Before taking any action, it’s essential to understand the legal and tax implications of renouncing your U.S. citizenship. The U.S. tax lawyers at Bordera Tax and Immigration Law offer comprehensive tax advice and legal services to help you navigate this process.
Once you’ve made the decision to renounce, the first step in our process is to prepare the requisite forms to detail your reasons for renouncing and your ties to the U.S. We’ll also prepare you for your in-person interview at a U.S. consulate or embassy where you will take an oath of renunciation.
It’s essential to have your historic U.S. tax returns completed and resolve any outstanding tax liabilities. Our process includes planning for the exit tax and filing all required forms with the IRS that will report your net worth and the assets you own.
In Canada, renouncing your U.S. citizenship does not automatically change your tax obligations. As a Canadian tax resident, you will continue to be subject to Canadian tax laws. However, it’s essential to review your investments and estate plans to ensure compliance with Canadian tax rules after renunciation.
Renouncing your U.S. citizenship due to Donald Trump’s policies or other reasons is a serious decision that requires careful thought and planning. While it can provide financial relief from U.S. tax obligations, it also comes with significant tax and legal considerations.
At Bordera Tax and Immigration Law, we understand the complexities of cross-border tax planning and U.S. citizenship renunciation. Our team has helped many clients in Calgary, Edmonton across Canada, and can help guide you through the renunciation process, ensure compliance with all tax obligations, and provide the strategic legal advice you need to make the best decision for your future.
If you’re considering renouncing your U.S. citizenship, Contact Bordera Tax and Immigration Law today to schedule a free consultation and get expert guidance tailored to your unique situation.
No, you must certify five years of tax compliance with the IRS before renunciation; otherwise, you may be subject to penalties and additional taxes.
The obligation to pay the Exit Tax depends on various factors, including your net worth, income tax liability, and the fair market value of your assets. If your net average income tax liability for the five years preceding your expatriation is below the specified threshold (e.g., $171,000 in 2023), you may not be subject to the Exit Tax. However, it's essential to calculate your potential tax liability accurately, as the rules can be complex and subject to change.
Renunciation means giving up the right to live and work in the US, as well as the right to vote in US elections. Many former citizens travel back to the US as visitors if they have renounced properly.
Bordera Tax and Immigration Law is a premier firm with a sound focus on cross-border tax issues for individuals, corporations, partnerships, and trusts. With offices in Calgary and Edmonton, our US lawyers and accountants assist clients worldwide in renouncing US citizenship, obtaining US visas, and expanding Canadian businesses into new US markets. We excel in voluntary disclosures, tax compliance, and dispute resolution with US and Canadian tax authorities. Our extensive knowledge in cross-border estates, trusts, and real estate investments enables us to optimise tax efficiency and safeguard clients' assets. We also offer guidance in Canadian departure tax planning. Trusted for our insight and experience, we have presented on cross-border tax topics to accounting firms, private wealth managers, and banks. Count on Bordera Tax and Immigration Law for top-tier advice and exceptional service.
