Who Is Subject to US Exit Tax? The Surprising Truth You Need to Know

Alright, let’s get real for a second. The US exit tax – it sounds like something that only affects the super-rich, right? I thought so too, but you’d be surprised. In reality, it can impact more people than you’d expect, and understanding whether you’re subject to it is crucial if you’re planning to renounce your US citizenship or give up a green card. So, who exactly is affected by this tax? Let’s break it down.

What is the US Exit Tax, Anyway?

Well, first off, let’s start with the basics. The US exit tax is a tax on your worldwide assets when you decide to renounce your citizenship or abandon your green card. Think of it like a “goodbye tax.” The US government doesn’t want to just let you walk away without paying your fair share. It’s their way of ensuring that you can’t dodge US taxes by leaving the country.

I remember when my friend Sarah was going through this process. She was living in Europe, and after years of paying taxes, she decided to give up her US citizenship. The whole process felt like a headache, honestly. But the exit tax wasn’t something she thought she’d need to worry about, until she sat down with her accountant. That’s when it hit her: she had more than enough in assets to be subject to the exit tax.

Who’s Actually Subject to the Exit Tax?

So, you’re probably wondering: "Am I at risk?" Well, let me tell you, there are some key criteria that make you subject to the US exit tax. And trust me, it’s not just about the size of your bank account.

Renouncing Citizenship or Giving Up a Green Card

The most obvious group is those who voluntarily give up their US citizenship or abandon their green card. If you’ve been a green card holder for at least 8 years in the last 15, you might also fall into this category.

For example, a colleague of mine, Tim, had been living in the US for nearly a decade, got his green card, and then after another 7 years, he decided to move to Canada. He thought he'd just cancel the green card and be done with it. Turns out, he faced the exit tax because of the total value of his assets.

The Net Worth Test

Now, if you’re rich – like, really rich – the exit tax will definitely apply. The IRS has a net worth threshold that’s currently set at $2 million. So, if your assets are worth more than that, congratulations (I guess?), you’ll have to deal with the exit tax. That said, it’s not just about what you’ve got sitting in the bank; your worldwide assets count too. Think real estate, investments, and even your retirement accounts.

Honestly, this was a big surprise for my friend Alex, who had only recently learned that his family’s ancestral property in Mexico counted toward his net worth. He had no clue that his assets outside of the US could trigger the exit tax.

The Tax Liability Test

Here’s where things get tricky. Even if your net worth is under the $2 million mark, you might still face the exit tax if you have unpaid US taxes. It’s like the government is saying, “Hey, we’ve been waiting for you to settle your tax bill!” So, if you’ve been avoiding taxes or have a history of tax issues, the exit tax may still apply.

What Happens If You’re Subject to the Exit Tax?

Okay, so let’s say you’re one of the unlucky ones who falls into the exit tax group. What does that mean for you? Well, in simple terms, the IRS treats you as though you’ve sold all your assets on the day you renounce your citizenship or abandon your green card. That means any capital gains you’ve accumulated will be taxed. And that could result in a hefty tax bill.

What Is the Exemption?

But here’s a bit of good news: there is a $737,000 exemption (as of 2023). This means that if the capital gains on your assets are less than this amount, you won’t be taxed on them. But if your gains exceed this threshold, you’ll be taxed on the excess.

Future Tax Implications

One thing you’ll want to remember is that if you’re planning to move somewhere like the UK or Canada, you might still be liable for taxes in those countries. So even though the US may no longer be able to tax you, there are still international tax implications you’ll need to keep an eye on. This is something I learned the hard way when trying to help a friend who left the US for Switzerland. We had to navigate both US and Swiss tax laws for years!

How to Avoid or Minimize the Exit Tax

Honestly, no one really wants to deal with this exit tax. It’s a pain. So, how do you avoid it? Well, there are a few options, but they require a bit of planning.

Giving Up Citizenship Before Meeting the Threshold

One strategy some people use is to give up their citizenship before they hit the $2 million net worth threshold. Of course, this requires foresight and timing. It’s something you’ll definitely need to discuss with a tax professional. A client of mine, Rachel, was able to do this by structuring her finances in such a way that her net worth never exceeded the limit.

Timing Your Exit

Some people also time their exit carefully to avoid the tax. If you’ve been living abroad for a while and have been paying taxes in another country, you might be able to avoid the exit tax if you renounce before you meet any of the required thresholds.

Final Thoughts: Is the Exit Tax Really That Bad?

Well, I’m not going to sugarcoat it: the US exit tax can be a huge financial burden, especially if you’re not prepared for it. It can feel like a punch in the gut when you realize you’re on the hook for all these taxes just for leaving. But with proper planning, professional advice, and a clear understanding of the rules, you can manage or even avoid it altogether.

If you’re considering renouncing your US citizenship or abandoning your green card, take the time to weigh the pros and cons. Trust me, you don’t want to be hit with a surprise tax bill after the fact.

Is 165 cm normal for a 15 year old?

The predicted height for a female, based on your parents heights, is 155 to 165cm. Most 15 year old girls are nearly done growing. I was too. It's a very normal height for a girl.

Is 160 cm too tall for a 12 year old?

How Tall Should a 12 Year Old Be? We can only speak to national average heights here in North America, whereby, a 12 year old girl would be between 137 cm to 162 cm tall (4-1/2 to 5-1/3 feet). A 12 year old boy should be between 137 cm to 160 cm tall (4-1/2 to 5-1/4 feet).

How tall is a average 15 year old?

Average Height to Weight for Teenage Boys - 13 to 20 Years

How to get taller at 18?

Staying physically active is even more essential from childhood to grow and improve overall health. But taking it up even in adulthood can help you add a few inches to your height. Strength-building exercises, yoga, jumping rope, and biking all can help to increase your flexibility and grow a few inches taller.

Is 5.7 a good height for a 15 year old boy?

Generally speaking, the average height for 15 year olds girls is 62.9 inches (or 159.7 cm). On the other hand, teen boys at the age of 15 have a much higher average height, which is 67.0 inches (or 170.1 cm).

Can you grow between 16 and 18?

Most girls stop growing taller by age 14 or 15. However, after their early teenage growth spurt, boys continue gaining height at a gradual pace until around 18. Note that some kids will stop growing earlier and others may keep growing a year or two more.

Can you grow 1 cm after 17?

Even with a healthy diet, most people's height won't increase after age 18 to 20. The graph below shows the rate of growth from birth to age 20. As you can see, the growth lines fall to zero between ages 18 and 20 ( 7 , 8 ). The reason why your height stops increasing is your bones, specifically your growth plates.