Expatriation Exit Tax §877A Calculator
Calculate the §877A exit tax owed when a US citizen renounces or a long-term green card holder formally abandons US tax residency. The exit tax applies a mark-to-market gain on all worldwide assets (subject to a $866,000 exclusion for 2024-2025) for 'covered expatriates' — those meeting net-worth, tax-liability, or compliance tests.
Who Is a Covered Expatriate?
Three independent tests under IRC §877A(g)(1)(A) — if you meet ANY of these, you are a covered expatriate and the exit tax applies: (1) Net worth ≥ $2,000,000 on expatriation date; (2) Average annual net US income tax for the 5 years before expatriation > $193,000 (2024 threshold, indexed); (3) Failure to certify under penalty of perjury that you complied with all US tax obligations for the 5 prior years (Form 8854). Test 3 is the gotcha for most non-compliant expatriates.
The Mark-to-Market Regime
On the day before expatriation, all worldwide property is treated as sold at fair market value. Resulting gain is recognized minus a $866,000 exclusion (2024, indexed). Losses can offset gains within the mark-to-market. Special rules apply to: (1) tax-deferred accounts (IRA, 401(k)) — full balance treated as distributed and taxed at ordinary rates, no early-withdrawal penalty; (2) deferred compensation — withholding regime via election; (3) interests in non-grantor trusts — withholding regime.
Eligible Deferred Compensation Election
For 'eligible deferred comp' (qualified plans + foreign-employer pensions), the expatriate can elect to have the payer withhold 30% US tax on distributions instead of mark-to-market exit. Requires Form W-8CE filed with payer within 30 days before expatriation. Most preserve their 401(k) under this election — the alternative is taxing the entire balance at ordinary rates in expatriation year. Carefully consider if you have high deferred comp (NQDC, deferred bonus): election may preserve tax timing.
How to Avoid Covered-Expatriate Status
Goal: drop below the $2M net worth and $193K avg tax thresholds AND certify 5 years of compliance. Strategies: (a) Pre-renunciation gifting to spouse (US citizen) — gift-tax-free under unlimited marital deduction. (b) Pre-renunciation gifting to non-spouse — limited to $18,000/year exclusion. (c) Roth conversion before renunciation — accelerates IRA tax but creates non-IRA assets. (d) Spend down income in prior 5 years to keep avg tax below threshold (rarely feasible).
Sources: IRC §877A (added by HEART Act 2008), Treas. Reg. §1.877A, IRS Form 8854, IRS Notice 2009-85, Rev. Proc. 2024-40 (inflation adjustments). Last updated: May 2026. Not tax advice.