Giving Up a Green Card: Tax Implications and the Exit Tax
Abandoning a green card makes you subject to US exit tax rules if you were a long-term resident, which means you may owe tax on unrealized gains above the exclusion amount and must file Form 8854.
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.
Related: How to Find an EA Who Knows Foreign Taxes · Remote EA: Work From Anywhere · The Credential Ladder · US Citizens Abroad Tax Guides