How the U.S. exit tax works
When a U.S. citizen renounces citizenship or a long-term green card holder gives up residence, 26 U.S.C. 877A can treat all of their property as sold at fair market value the day before expatriation. This mark-to-market rule applies only to a covered expatriate, which is determined by three tests: a net worth of $2 million or more, an average annual net income tax for the five prior years above an inflation-adjusted threshold, or an inability to certify five years of tax compliance on Form 8854. Meeting any one test is enough.
This calculator checks the three tests from the figures you enter, applies the inflation-adjusted exclusion to the net unrealized gain, and multiplies the remainder by the capital gains rate you supply. Entering 23.8% covers the top long-term rate plus the 3.8% net investment income tax, but your own rate may be lower.
Figures are on a 2026 basis. The income tax threshold and the gain exclusion are indexed for inflation and published by the IRS each year, so both are editable fields. The calculation leaves out the separate treatment of deferred compensation, specified tax-deferred accounts and non-grantor trust interests, the deferral election under 877A(b), and any treaty relief. Expatriation is an irreversible step with significant tax consequences, so treat this as an estimate and work with a cross-border tax professional before filing Form 8854.
Frequently asked questions
Under 26 U.S.C. 877A a covered expatriate is someone who gives up citizenship or long-term resident status and meets any one of three tests: net worth of $2 million or more, average annual net income tax above an inflation-adjusted threshold for the five prior years, or failure to certify five years of tax compliance on Form 8854.
No. The mark-to-market regime treats property as sold at fair market value the day before expatriation, then excludes an inflation-adjusted amount of net gain. Only the excess is taxed, and an election is available to defer the tax with adequate security and interest.
No. Eligible deferred compensation, ineligible deferred compensation and specified tax-deferred accounts such as IRAs are handled under separate rules in 877A, not by the mark-to-market calculation shown here.