Over 50% of US Expats Consider Renouncing Citizenship: What's Driving the Trend in 2026

A survey released by MyExpatTaxes on May 4, 2026, delivered a number that should alarm policymakers in Washington: over 50% of Americans living abroad have considered renouncing their US citizenship. This is not a fringe sentiment from a handful of disgruntled expats. It reflects a deep and growing frustration with the United States' citizenship-based taxation system — a system shared by only one other country in the world, Eritrea. When more than half of the estimated 9 million US citizens living overseas are weighing the permanent, irreversible step of giving up their nationality to escape a tax regime, the system is not working as intended. Combined with the new 1% remittance tax signed into law as part of the One Big Beautiful Bill Act and the IRS's intensifying AI-powered enforcement, 2026 is shaping up to be a tipping point for Americans abroad.

Why Are Expats Frustrated?

The United States is the only major country in the world that taxes based on citizenship rather than residence. Every other developed nation — Canada, the UK, Australia, Germany, France, Japan — taxes individuals based on where they live. If a Canadian citizen moves to Portugal, Canada stops taxing them on their worldwide income once they establish Portuguese tax residency. The US does not work this way. A US citizen living in Tokyo, London, or Toronto for 30 years is still required to file a federal income tax return every year, reporting every dollar of worldwide income to the IRS.

The filing burden goes far beyond Form 1040. US citizens abroad must also navigate FBAR (FinCEN Form 114) to report every foreign bank account, investment account, RRSP, TFSA, or pension account with an aggregate value exceeding $10,000 at any point during the year. FATCA Form 8938 adds a second layer of foreign asset reporting for those exceeding higher thresholds. For US citizens in Canada, the Tax-Free Savings Account (TFSA) — an account that is entirely tax-exempt under Canadian law — is treated by the IRS as either a foreign grantor trust or a vehicle holding Passive Foreign Investment Companies (PFICs), triggering Form 3520 or the punitive PFIC regime under IRC Sections 1291-1298. Canadian Registered Retirement Savings Plans (RRSPs) require treaty elections to defer US taxation on growth. The compliance cost for a straightforward US-Canada dual filer — not a wealthy individual, just someone with a normal job and normal accounts — routinely runs $2,000 to $5,000 per year in cross-border tax preparation fees.

Layer on top of this the new 1% remittance tax enacted as part of the One Big Beautiful Bill Act (OBBBA), the IRS's expanding use of artificial intelligence to identify non-filers through automated cross-referencing of FATCA data transmitted by foreign banks, and a growing sense that the system penalizes ordinary middle-class Americans abroad rather than the ultra-wealthy it was designed to target — and the 50% number in the MyExpatTaxes survey starts to look not just understandable, but predictable.

The New 2026 Remittance Tax Explained

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced a 1% federal excise tax on certain international money transfers originating from the United States. The tax applies to outbound remittances made through banks, wire transfer services, money order providers, and other licensed money transmitters. It covers transfers of cash, money orders, cashier's checks, and equivalent instruments sent to recipients outside the United States.

For the 9 million Americans living abroad, this provision creates a new friction point. Expats who maintain US bank accounts — as many do, for receiving Social Security payments, managing US-based investments, or paying US obligations like student loans — now face a 1% levy every time they transfer funds from a US account to their country of residence. A retiree in Mexico transferring $3,000 per month from a US bank account to cover living expenses now pays $30 per month — $360 per year — in remittance tax alone, on top of any wire fees, foreign exchange spreads, and existing tax obligations.

The remittance tax was primarily designed to target undocumented workers sending wages to family members in their home countries. But the statute as written does not distinguish based on the citizenship or immigration status of the sender. US citizens transferring their own after-tax dollars to themselves in another country are subject to the same 1% levy. For expats already frustrated by the compliance burden of citizenship-based taxation, this new tax — however small in absolute terms — feels like one more penalty for the decision to live abroad. It reinforces the narrative that the US tax system treats expatriates as revenue sources rather than citizens exercising their right to live and work internationally.

What Renouncing Actually Costs

The headline cost of renouncing US citizenship is the State Department administrative fee: $2,350. This is paid at the time of the formal renunciation appointment at a US consulate or embassy abroad. But the administrative fee is the smallest part of the equation. The real financial exposure comes from the exit tax under IRC Section 877A, which can transform a seemingly straightforward decision into a six-figure tax event.

The exit tax applies to "covered expatriates" — individuals who meet any one of three thresholds:

• Net worth exceeds $2 million on the date of expatriation
• Average annual net income tax liability for the five tax years preceding expatriation exceeds approximately $201,000 (2026 inflation-adjusted threshold)
• Failure to certify five years of US tax compliance on Form 8854

If you are a covered expatriate, IRC Section 877A imposes a mark-to-market deemed sale: all of your worldwide assets are treated as if sold at fair market value on the day before your expatriation date. The net unrealized gain above an exclusion amount — approximately $866,000 for 2026 (inflation-adjusted annually) — is taxed at the applicable capital gains rates.

Consider a concrete example: a US-Canadian dual citizen with a primary residence in Toronto worth $1.2 million (cost basis $600,000), an RRSP worth $800,000 (cost basis $400,000), a non-registered investment portfolio worth $700,000 (cost basis $350,000), and $300,000 in other assets. Total net worth: $3 million. Total unrealized gain: $1,350,000. After applying the $866,000 exclusion, the taxable deemed gain is $484,000. At a blended federal capital gains rate, the exit tax bill would exceed $100,000 — paid immediately, on assets that have not actually been sold, with no corresponding cash from a real transaction.

Deferred compensation — including pensions, 401(k) accounts, and traditional IRAs — is subject to separate rules. Rather than a deemed distribution, these accounts are taxed when distributions are actually made, but at a flat 30% withholding rate with no treaty benefits available. For someone with a substantial 401(k), this means a permanent, non-reducible 30% tax on every future distribution, compared to the potentially lower marginal rates that would apply if they had remained a US citizen.

Better Alternatives to Renunciation

The MyExpatTaxes survey captures a sentiment — frustration — but the solution for most expats is not renunciation. It is proper tax planning. The US tax code contains several provisions specifically designed to prevent double taxation for Americans living abroad, and when applied correctly, they reduce the actual US tax bill to $0 for the vast majority of expats in developed countries.

Foreign Earned Income Exclusion (FEIE): Under IRC Section 911, qualifying US citizens and residents living abroad can exclude up to $132,900 of earned income for 2026 from US taxation. To qualify, you must either pass the bona fide residence test (tax resident of a foreign country for an entire calendar year) or the physical presence test (present in a foreign country for at least 330 full days in a 12-month period). The FEIE is claimed on Form 2555.

Foreign Tax Credit (FTC): For expats in countries with income tax rates equal to or higher than US rates — which includes Canada, the UK, Germany, France, Australia, Japan, and most of Western Europe — the Foreign Tax Credit on Form 1116 provides a dollar-for-dollar credit against US tax for income taxes paid to the foreign country. A US citizen in Canada earning $150,000 CAD and paying Canadian federal and provincial income tax at an effective rate of 30% will have more than enough foreign tax credits to offset the entire US liability. The result: $0 owed to the IRS.

Streamlined Filing Compliance Procedures: If you are behind on US filings, the IRS Streamlined Foreign Offshore Procedures allow you to catch up by filing three years of tax returns and six years of FBARs with no penalty for qualifying non-willful filers residing abroad. Many expats who enter this program discover they owed nothing all along — they just needed to file the paperwork.

Tax Treaty Benefits: The US has income tax treaties with over 60 countries. The US-Canada Tax Treaty, for example, protects RRSP growth from current US taxation, provides an 85% exclusion for CPP and OAS income received by US residents, and offers a dual-residency tiebreaker that prevents simultaneous taxation as a resident of both countries. These treaty provisions, properly claimed on Form 8833, can save thousands of dollars annually.

The bottom line: renunciation is a permanent solution to what is often a temporary or solvable problem. Proper cross-border tax planning eliminates the actual tax burden without giving up the rights, protections, and optionality that come with US citizenship.

US-Canada Dual Citizens: A Special Case

Canadians with US citizenship — whether born in the US, born to US parents in Canada, or holding a green card — represent one of the largest populations of dual citizens in the world. The renunciation question hits this group particularly hard, and the answer is almost always: you do not need to renounce.

Canada's income tax rates are higher than US federal rates at virtually every income level. Combined federal and provincial marginal rates in Ontario, for example, reach 53.53% at the top bracket. This means the Foreign Tax Credit almost always fully eliminates the US tax liability for a Canadian-resident US citizen. You file the US return, calculate the US tax, apply the FTC for Canadian taxes paid, and the result is $0 owed.

The RRSP is protected by the US-Canada Tax Treaty under Article XVIII(7). Growth inside the RRSP is tax-deferred for US purposes, and the old Form 8891 annual election requirement was eliminated by Revenue Procedure 2014-55. The main pain point is the TFSA, which the IRS does not recognize as a tax-exempt account. Depending on its holdings, a TFSA can trigger the punitive PFIC regime (Form 8621) or foreign grantor trust reporting (Form 3520/3520-A). This is a genuine compliance headache, but it is a filing problem, not a tax-owing problem — and it does not justify the irreversible step of renouncing citizenship.

CPP and OAS payments received by US residents are taxable on the US return but benefit from the treaty's 85% exclusion (only 15% is includable in US gross income) and are further offset by the FTC. In practice, US-Canada dual citizens in Canada who file correctly owe the IRS nothing — or close to nothing — every year.

Here is the critical point that many people overlook: renouncing US citizenship while living in Canada can trigger both the US exit tax AND the Canadian departure tax on the same assets. Canada imposes a deemed disposition on worldwide assets when a taxpayer ceases to be a Canadian resident, and if the renunciation is accompanied by or triggers a change in Canadian residency status, you face a double hit. Even if you remain a Canadian resident, the US exit tax creates an immediate, unreimbursed tax liability on unrealized gains. A cross-border specialist can almost always structure your affairs to eliminate the annual US tax burden without renunciation — and without the exit tax consequences that come with it.

Frequently Asked Questions

Do I have to pay US taxes if I live abroad permanently?

Yes. The US taxes based on citizenship, not residence. You must file a federal return and report worldwide income regardless of where you live. However, the Foreign Earned Income Exclusion (up to $132,900 for 2026), the Foreign Tax Credit, and tax treaty benefits often reduce the actual tax owed to $0 for expats in countries with equal or higher tax rates. You must still file the return and all information returns (FBAR, Form 8938) even when no tax is due.

How much does it cost to renounce US citizenship?

The State Department fee is $2,350. But if you qualify as a "covered expatriate" under IRC Section 877A — net worth over $2 million, average annual tax liability over ~$201,000 for the prior five years, or inability to certify five years of compliance — the exit tax applies. This mark-to-market deemed sale of all worldwide assets can result in a tax bill of $100,000 or more. Deferred compensation accounts face a permanent 30% withholding rate on future distributions.

What is the exit tax?

The exit tax under IRC Section 877A treats all your worldwide assets as if sold at fair market value on the day before you expatriate. The net gain above an approximately $866,000 exclusion (2026 inflation-adjusted) is taxed at capital gains rates. For someone with $3 million in assets and $1.5 million in unrealized gains, the exit tax bill could exceed $100,000 — due immediately, even though no assets were actually sold.

Can I avoid double taxation without renouncing?

Absolutely. The Foreign Tax Credit provides a dollar-for-dollar offset for taxes paid to your country of residence. Expats in Canada, the UK, Germany, and most of Western Europe owe $0 to the IRS after applying the FTC. The FEIE excludes up to $132,900 of earned income. Tax treaties provide additional relief — the US-Canada treaty alone protects RRSP growth and excludes 85% of CPP/OAS income. Proper planning eliminates double taxation for the vast majority of expats without the irreversible step of renouncing.

What if I haven't filed US taxes in years?

The IRS Streamlined Foreign Offshore Procedures allow qualifying non-willful filers living abroad to catch up by filing three years of tax returns and six years of FBARs — with no penalty. Many expats who enter the program discover they owed little or nothing after applying the Foreign Tax Credit and FEIE. The program remains open as of 2026. Do not attempt to file retroactive returns outside the Streamlined program without professional guidance, as the sequencing affects penalty exposure and treaty election availability. Speak with a cross-border specialist to determine the right path for your situation.