Giving Up a Green Card: Tax Implications and the Exit Tax

2026-07-09

Last reviewed: July 9, 2026. This article reflects current IRS rules and EA exam requirements as of this date.

Surrendering a green card is more than an immigration decision — it's a tax event. The US imposes an exit tax on certain long-term residents who give up their permanent resident status.

The Trigger: Long-Term Resident Status

You're a long-term resident for US tax purposes if you held a green card in at least 8 of the last 15 tax years. If you meet this test, the expatriation tax rules under Internal Revenue Code section 877A apply.

The Exit Tax

You're a "covered expatriate" if you meet any of three tests:

Your average annual net income tax liability for the 5 years before expatriation exceeds $201,000 (2025, adjusted for inflation)
Your net worth is $2 million or more on the date of expatriation
You fail to certify on Form 8854 that you've complied with all US federal tax obligations for the 5 preceding years

If you're a covered expatriate, you pay a mark-to-market exit tax. All your assets are treated as sold for fair market value on the day before expatriation. The first $866,000 of gain (2025, adjusted for inflation) is excluded. Gains above that threshold are taxed as capital gains.

The Key Forms

Form I-407. Filed with USCIS to formally abandon your green card. The abandonment is effective when USCIS accepts the form — not when you leave the US, not when you stop filing. Until the form is accepted, you remain a US tax resident.

Form 8854. Initial and Annual Expatriation Statement. Filed with your final Form 1040. This form:

Certifies your tax compliance for the 5 preceding years
Determines whether you're a covered expatriate
Reports the mark-to-market exit tax calculation (if applicable)
Includes the balance sheet of your assets and liabilities on the expatriation date

Form 1040-C. Departing Alien Income Tax Return. Required before leaving the US if you're a resident alien ending your residency. In practice, often satisfied by filing your final Form 1040 and obtaining a sailing permit (Certificate of Compliance).

The Exceptions

You're exempt from the covered expatriate rules if:

You were a dual citizen at birth and continue to be a citizen of the other country, AND
You were a US resident for not more than 10 of the last 15 years, AND
You've never held a US passport or applied for one

This is the dual-citizen-at-birth exception under section 877A(g)(1)(B). Many accidental Americans (born in the US to foreign parents who returned home) qualify.

After Abandonment

Once your green card is abandoned, you're a nonresident alien for US tax purposes. Your US-source income (rental property, dividends from US stocks, partnership income) is still taxable. Your foreign-source income is not. You may still need to file Form 1040-NR for US-source income.

An EA can help with the exit tax calculation, the Form 8854 filing, and the final return. If the exit tax is substantial — six or seven figures in mark-to-market gain — an attorney should be involved to structure the abandonment optimally.

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