Giving up a blue passport isn't like unsubscribing from a gym membership. It's more like a messy, expensive breakup with a government that has a very long memory. Most people think they can just walk into an embassy, toss their passport on the desk, and walk out free of Uncle Sam forever. It doesn't work that way. Honestly, the process of the relinquishment of U.S. citizenship is one of the most bureaucratic marathons you can run, and if you trip, the IRS is usually there to catch you—but not in a good way.
You've probably heard about Boris Johnson doing it. The former British Prime Minister was born in New York, which meant he was a U.S. citizen by birth. When he sold his house in North London, the IRS came knocking for capital gains tax. He called it "absolutely outrageous," but eventually, he paid up and went through the formal process to cut ties. He’s not alone. Every year, thousands of "accidental Americans"—people born in the States who haven't lived there since they were toddlers—realize that their birthplace is actually a global tax liability.
The Massive Difference Between Relinquishment and Renunciation
Wait, aren't they the same thing? Not exactly.
Legally, they fall under the same umbrella of losing nationality, but the "how" matters. Renunciation is the formal path. You make a voluntary appointment at a U.S. consulate, raise your right hand, and swear an oath that you’re done. It costs $2,350. Well, actually, there has been a lot of legal back-and-forth lately about lowering that fee to $450 because of a lawsuit by the Association of Accidental Americans, but for a long time, it was the highest fee in the world.
Relinquishment is different. It’s based on "expatriating acts." Basically, you perform an action with the intent to lose your citizenship. This could be naturalizing in another country, taking a policy-level job in a foreign government, or joining a foreign military.
But here’s the kicker: even if you "relinquished" your citizenship by becoming a Canadian citizen in 1985, the State Department doesn't just know that. You still have to prove it. You have to show that when you took that Canadian oath, you specifically intended to give up your U.S. status. If you kept using your U.S. passport to travel after that "act," the government is going to say your intent wasn't clear. You’re still a citizen. And you still owe taxes.
Why People Are Actually Leaving
It’s almost always about the money. Specifically, FATCA.
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The Foreign Account Tax Compliance Act changed everything for expats. It forced foreign banks to report the accounts of U.S. persons to the IRS. Suddenly, a French guy who happened to be born in Detroit but hasn't been back since he was two years old finds his bank account frozen in Paris. Why? Because the bank is scared of U.S. penalties. To keep his bank account, he has to provide a Social Security Number he doesn't have. To get the number, he has to enter the U.S. tax system.
It's a trap.
The U.S. is one of only two countries—Eritrea is the other—that taxes based on citizenship rather than where you live. If you’re an American living in Tokyo, you still file with the IRS. You might not owe anything because of the Foreign Earned Income Exclusion, but you still have to file. The paperwork is a nightmare. Some expats spend $5,000 a year just on accountants to prove they owe $0 in taxes. That’s why relinquishment of U.S. citizenship has seen such a spike in the last decade. It’s a survival tactic for people living abroad who want to buy a house, start a business, or just have a retirement savings account without the IRS treating it like a "passive foreign investment company" (PFIC) and taxing it at 40%.
The "Exit Tax" and the Point of No Return
If you think you can just leave to avoid a big tax bill, the IRS has a parting gift called the Exit Tax. This is the "covered expatriate" trap.
Who is a covered expatriate? Usually, it's someone with a net worth over $2 million or someone who has paid an average of roughly $190,000 in income tax over the last five years. If you fall into this bucket, the IRS treats your exit as if you sold everything you own on the day before you left. They want the capital gains tax on the "pretend" sale of your home, your stocks, and your business.
It is brutal.
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And don't think you can just lie. Part of the process involves Form 8854. You have to certify, under penalty of perjury, that you have been fully tax-compliant for the last five years. If you haven't been filing your FBARs (Foreign Bank Account Reports), you can’t just walk away. You have to clean up the mess first, which often means back-filing years of returns.
The Social and Emotional Cost
There’s a weird stigma attached to this. People call it "unpatriotic."
But for many, it's a choice between their heritage and their current life. Imagine being a dual citizen in Germany. You want to take a government job, but you can’t because you hold a U.S. security clearance you never asked for. Or you’re a small business owner in Australia, and you realize you can’t participate in certain pension schemes because the U.S. tax code doesn't recognize them as "qualified."
It’s a heavy decision. Once you receive your Certificate of Loss of Nationality (CLN), it’s over. You are a foreigner. You need a visa or an ESTA to visit your grandma in Florida. If you change your mind later, it’s almost impossible to get your citizenship back unless you can prove you were under extreme duress or were a minor when it happened.
Steps to Take if You’re Serious
If you’re staring at your tax bill and thinking about the relinquishment of U.S. citizenship, don't just stop filing. That’s how you get fined.
First, get your taxes in order. You need five years of clean filings. If you’ve been "off the grid," look into the Streamlined Filing Compliance Procedures. It’s a way for expats to catch up without getting hammered by penalties.
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Second, find a consulate. Some are much easier to deal with than others. During the pandemic, many consulates shut down these services entirely, creating a massive backlog. Some people were waiting two years just for an interview.
Third, get a real tax attorney. Not a regular accountant, but someone who understands international tax law and the expatriation process. One wrong move on Form 8854 can cost you hundreds of thousands of dollars.
- Verify your dual nationality. Never relinquish U.S. citizenship if you don't have another passport. You do not want to be stateless. It’s a legal nightmare where no country is obligated to let you live there.
- Review the "Covered Expatriate" criteria. If your net worth is near $2 million, talk to a financial planner about "gifting" assets to a spouse or shifting investments to stay under the threshold before you start the process.
- Gather your evidence. If you are claiming relinquishment based on a past act (like taking a foreign oath in 2010), you need documentation. Newspaper clippings, employment contracts, or the official naturalization certificate from that country are vital.
- Prepare for the interview. It’s not a interrogation, but they will ask if you understand what you’re doing. They want to make sure you aren't being coerced. Be firm, be polite, and be clear that your intent is to terminate your relationship with the U.S. government.
The reality is that for most, this isn't about politics. It isn't about hating America. It's about the fact that the U.S. global tax reach has made it nearly impossible to live a normal financial life outside of U.S. borders. It’s a cold, hard business decision for the modern expat.
Check the current status of the renunciation fee before you book your appointment. The State Department has proposed lowering it back to $450, but the timeline for this change has been murky. Saving $1,900 is worth a few weeks of waiting. Once you have your CLN in hand, keep it in a fireproof safe. It is the only document that proves you no longer owe the IRS for the rest of your life.
Make sure you also notify your bank immediately once you have the certificate. This is what stops the FATCA reporting and allows you to open investment accounts or take out mortgages without the "U.S. person" red flag causing issues. Moving forward, you’ll be treated like any other foreign national, which means you’ll only pay U.S. tax on "U.S. source" income, like rental income from a property in the States or dividends from U.S. companies. The global shadow of the IRS will finally be gone.