Tax and residency

Exit tax and expatriation

Also called exit tax, expatriation tax, covered expatriate, long-term resident, Form 8854.

The exit tax is the mark to market charge under 26 U.S.C. 877A that treats all property of a covered expatriate as sold at fair market value on the day before they give up US citizenship or long-term US permanent residence.

What it decides

It bites only a covered expatriate, and a green card holder becomes exposed only once they are a long-term resident, meaning a lawful permanent resident in at least 8 taxable years within the 15 taxable year period ending with the year of expatriation, leaving out any year in which a treaty treated them as a resident of another country and they did not waive the treaty benefits. Any one of the three tests in 877(a)(2) makes a person covered: average annual net income tax over the five preceding taxable years above $211,000 for 2026, net worth of $2,000,000 or more, or failure to certify five years of tax compliance, which is done on Form 8854. For 2026 the deemed gain is then reduced by $910,000. The two exceptions in 877A(g)(1)(B), for those who were dual citizens at birth and for those who relinquish before age 18 and a half, both turn on relinquishing US citizenship, so no green card holder can reach them. The year the card is handed back can therefore carry tax on assets that were never sold.

Governed by 26 U.S.C. 877A(a)(1) for the deemed sale, 877A(a)(3) for the exclusion amount, 877A(g)(1) for covered expatriate and its two exceptions, 877A(g)(2) for expatriate and 877A(g)(3) for the expatriation date; 26 U.S.C. 877(a)(2) for the three tests and 877(e)(2) for long-term resident and its treaty carve out; Rev. Proc. 2025-32 sections 4.37 and 4.38 for the 2026 figures of $211,000 and $910,000, read from the IRS PDF. The USCIS side is irrelevant here: giving up the card is Form I-407, but the tax turns on the taxable year count, not the immigration filing. The IRS expatriation tax page, last reviewed 3 October 2025, is good for the shape of the three tests but still prints the 2025 figure of $206,000 and is not a source for 2026.

Where this is explained properly

Pages here that go into exit tax and expatriation rather than mentioning it.

Related terms

Lawful permanent residentA lawful permanent resident is a person lawfully accorded the privilege of residing permanently in the United States as an immigrant under 8 U.S.C. 1101(a)(20), and it is the status an EB-5 case delivers: conditional for the first two years, then unconditional once Form I-829 is approved.
Form I-407Form I-407, Record of Abandonment of Lawful Permanent Resident Status, is the voluntary filing by which a permanent resident records that they have given up that status, and signing it waives the right to have an immigration judge decide whether the status was in fact abandoned.
Abandonment of residenceAbandonment of residence is the loss of lawful permanent resident status that follows from conduct showing the holder no longer intends to make the United States a permanent home, most often moving abroad for good, staying out on what is no longer a temporary visit, or claiming nonresident status on a US tax return.
Tax treatyA tax treaty is a bilateral agreement that allocates taxing rights between two countries, and its residence tie-breaker article decides which of them may tax a person on worldwide income, a choice that for a green card holder reaches well past the tax bill into expatriation tax and into whether the green card itself survives.
Worldwide incomeWorldwide income is the rule that a United States resident for tax purposes, including a green card holder whose residence is still conditional, is taxed on income from every source anywhere in the world and not only on income arising inside the United States.

Checked against primary sources on 10 August 2026. Back to the glossary