The 3 Biggest Mistakes When Renouncing U.S. Citizenship (And How to Avoid Them)

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Renouncing your U.S. citizenship is a significant decision. For many, it represents freedom from complex tax obligations and reporting requirements. But even when the decision feels clear, the process can be fraught with challenges.

From my experience helping dozens of clients navigate this path, here are the three most common mistakes—and how you can avoid them:

1. Not Understanding the Exit Tax and When It Applies

The exit tax is one of the most misunderstood aspects of renouncing U.S. citizenship. This "final settlement" with the IRS treats all your assets as though you sold them the day before your renunciation. For those with significant assets, this can mean a hefty tax bill.

The catch? Many people don’t realize the thresholds for being subject to the exit tax and assume it applies to them. For many, there may be no exit tax at all. Even when it does apply, there are ways to mitigate or avoid it entirely with careful planning. That brings us to the next critical point.?

2. Not Planning Properly Beforehand

One of the biggest—and most costly—mistakes is failing to plan before starting the process. Filing all required U.S. tax returns is non-negotiable. If you haven’t done so, the IRS may classify you as non-compliant, which can trigger the exit tax.

Proper estate planning is equally crucial. Without it, you could miss critical opportunities to protect your assets. For example, gifting assets or setting up trusts while exemption thresholds are high could save you millions. The current gift tax exemption threshold is \$13.61 million but is set to drop by half at the end of 2025. Planning now ensures you don’t leave money on the table.

The golden rule? Ensure your tax and financial records are spotless before starting the renunciation process. Poorly executed acts of renunciation can be nearly impossible to fix later. Getting it right the first time is essential.

3. Taking Too Long

Delaying renunciation is another common mistake. People often postpone for years due to political uncertainty, personal hesitation, or global events like ongoing conflicts. Many feel hesitant to sever ties with the U.S. in case they need an escape route from their home country. While these concerns are valid, procrastination can lead to missed opportunities and higher costs.

For instance, the gift tax exemption threshold, currently almost $14 million, will drop significantly at the end of 2025. Waiting too long might mean paying substantially more in taxes than necessary. Additionally, embassy appointments can take months to schedule—and closures or delays due to unforeseen events could push your timeline even further.

Avoid These Mistakes—Take Action Today

Renouncing U.S. citizenship can be a liberating step, but only if it’s done right. Avoid these common mistakes by understanding the exit tax, planning meticulously, and acting decisively.

If you’re considering taking the plunge, here are 10 reasons not to delay.