The Exit Tax for Green Card Holders: What Long-Term Residents Need to Know

The exit tax applies not only to US citizens who renounce their citizenship but also to long-term green card holders who relinquish their permanent resident status. A long-term resident is defined as someone who has held a green card for at least eight of the last fifteen years, and if you qualify as a covered expatriate when you abandon your green card, you are subject to the same mark-to-market exit tax as a renouncing citizen. You become a covered expatriate if your average annual net income tax for the five years before expatriation exceeds a threshold ($206,000 in 2024), your net worth on the date of expatriation is $2 million or more, or you cannot certify that you have been tax compliant for the five years before expatriation. Form 8854 must be filed in the year you relinquish your green card, and failure to file means you are automatically a covered expatriate regardless of your actual financial situation. Green card holders considering eventually abandoning their status should assess the exit tax implications well before the eighth year of holding the card, since planning options are significantly narrower once you cross that threshold.