7 Reasons Behind Why People Renounce Their US Citizenship

Why People Renounce Their US Citizenship

Renouncing your US citizenship is a big decision. Not only are you giving up your right to vote and government protection while overseas, but you also won’t be able to work in the US until you reinstate your citizenship. Renunciation is also a lengthy, often expensive process.

However, there are still many personal and political reasons why a US citizen would make a formal renunciation request. Here are 7 great reasons why you may want to do the same.

Why US Citizens Renounce Their Citizenship

The amount of Americans who have renounced their citizenship increased by 237% from 2019 to 2020. This upward trend is unlikely to change soon. Here are the following reasons why.

1. To Escape General US Taxation Laws

The United States is one of the few remaining countries that taxes its citizens if they work overseas. Or, even if they don’t have a US home address. TAll US citizens who live abroad must file US income tax as well as income tax for the country they currently reside in.

Double taxation (and sometimes triple taxation, if the citizen lives or sells goods in Canada) can severely reduce a person’s take-home income. Especially if they’re high-income earners. Even with tax credits, Americans can’t eliminate their tax burden without renouncing citizenship.

2. US Capital Gains Tax Rumored Increase

Reduced capital gains tax is another benefit of renouncing US citizenship. Although Biden’s budget proposal and supposed 39.6-43.4% tax hike hasn’t been implemented as of writing, many high-income Americans are trying to renounce their citizenship before it does.

The IRS cracking down on cryptocurrency, which is subject to the capital gains tax. Thus, many wealthy Americans are leaving to use their wallets in a country that doesn’t tax nonfungible tokens. However, they still have to settle up their crypto taxes with Uncle Sam before renouncing.

3. To Apply for a Naturalized Citizenship

A naturalized citizen is someone who gains citizenship in a country they weren’t born in. Although some countries allow dual citizenship with the United States, 146 do not. To become a citizen of these countries, an American must renounce their US citizenship before applying.

4. To Cut Ties With a Country They Never Lived In

There are plenty of people who were born in the United States but have never actually lived there. While these people are considered US citizens by law and likely won’t have to pay US taxes, they do have to pay the cost of filing. To avoid this expense, they must renounce.

5. To Join a Foreign Army Fighting Against the US

There are several reasons why a US citizen wouldn’t want to fight with the US army in times of war but would still like to fight for the country they reside in. However, a US citizen can’t join a foreign army if they’re a country fighting against the United States or their current war allies.

6. To Avoid Drafting Protocols That Occur During War

Under US law, all male US citizens between 18 and 25 are required to register for Selective Services within 30 days of their 18th birthday. If a US male citizen doesn’t register, they could be subject to fines and up to five years in prison. They must renounce to avoid the draft, as well.

7. To Accept a Job Where an Oath of Allegiance is Required

As a US diplomat working on behalf of the US government in a foreign country, you don't have to renounce to get a government position. However, if you plan to work on behalf of the foreign country you reside in. Then, you must renounce and/or swear loyalty via an oath of allegiance.

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