Does the US government seize a portion of worldwide wealth when one renounces one’s US citizenship?
Yes—but not in the sense that the U.S. government takes a percentage of all your worldwide wealth simply because you renounce citizenship.
The U.S. has an “exit tax” for certain people who renounce U.S. citizenship. It can be substantial, but it is essentially a tax on unrealized gains, not a confiscation of your assets.
How it works
If you are a “covered expatriate,” the U.S. generally pretends that you sold most of your worldwide assets at fair market value on the day before expatriation. You then owe U.S. income tax on the resulting gains.
You are generally a covered expatriate if any one of these applies:
- Your net worth is $2 million or more when you expatriate.
- Your average annual U.S. federal income-tax liability for the preceding five years exceeds the applicable threshold—$211,000 for 2026.
- You cannot certify that you complied with your U.S. federal tax obligations for the preceding five years.
There is an important wrinkle: $2 million of net worth does not mean the government takes 2% or 20% of your wealth. Rather, suppose you have:
- $5 million portfolio
- You originally paid $1 million for it
- It is worth $5 million when you renounce
The deemed sale could produce approximately $4 million of capital gain, subject to the detailed rules and exclusions. The resulting tax is what you potentially owe—not a tax on the $5 million principal itself.
For 2025, the first $890,000 of net gain under the mark-to-market regime is excluded; that amount is inflation-adjusted.
So could someone lose a significant portion of their wealth?
Potentially, yes, but indirectly. If someone has accumulated enormous unrealized capital gains, the exit tax can generate a large tax bill.
For example, imagine someone who became extremely wealthy through appreciating stock:
Bought stock for $10 million → worth $100 million when renouncing.
The U.S. can generally treat that stock as though it had been sold for $100 million immediately before expatriation, even though the person didn’t actually sell it. The resulting ~$90 million gain could therefore trigger a very large tax liability.
There are also special rules for pensions/deferred compensation and certain trusts, which don’t simply follow the ordinary mark-to-market calculation.
But there’s an important distinction
If you’re asking whether “renouncing U.S. citizenship means the government takes part of everything I own worldwide”, the answer is:
No.
A person who isn’t a covered expatriate generally doesn’t become subject to the mark-to-market exit tax merely because they renounce. They still have to file the required expatriation paperwork and settle their outstanding U.S. tax obligations, however.
And the U.S. government doesn’t seize your foreign bank accounts, houses, businesses, etc. The issue is that the IRS can impose a tax liability calculated using the value of those worldwide assets.
There is also a separate gift/estate-tax regime for certain gifts or bequests by covered expatriates to U.S. citizens or residents, which can matter long after renunciation
Example of homeowner abroad: I have recently sold a house in the UK. What percentage of those proceeds is taxable in the US?
If you are a U.S. citizen or U.S. tax resident, the U.S. generally does not tax a percentage of thesale proceeds from your UK house. It taxes the capital gain, and potentially only part of that gain.
The basic calculation is:
Sale price − selling costs − adjusted cost basis = capital gain
Your basis generally starts with what you paid for the house, plus qualifying capital improvements and certain acquisition costs.
If it was your main home
This is particularly important: the U.S. principal-residence exclusion applies to a home outside the United States too.
If you owned and lived in the UK property as your main home for at least 2 of the 5 years before the sale, you may exclude up to:
- $250,000 of gain if single
- $500,000 of gain for many married couples filing jointly
The exclusion is on the gain, not on the sale proceeds.
Example
Suppose:
- You bought the UK house for £400,000
- You spent £50,000 on qualifying improvements
- You sold it for £800,000
- Selling costs were £30,000
Very roughly, your gain would be:
£800,000 − £30,000 − £450,000 = £320,000
You would not simply pay U.S. tax on £800,000.
And because the U.S. requires the calculations to be made in U.S. dollars, the actual calculation can be considerably more complicated than converting the final £320,000 at today’s exchange rate. The exchange rate at the relevant dates can affect the dollar gain.
There may also be UK capital-gains tax, with the possibility of a foreign tax credit against U.S. tax, so you don’t necessarily pay the full tax twice.
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