Americans renouncing their citizenship reaches record high

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According to official numbers, a record number of Americans renounced their US citizenship last year. The US Federal Register published statistics showing that 5,411 people Americans up their nationality, an increase of 26% from 2015.

For many of those giving up their nationality, taxes was the main motivation.

American expats and taxes:

Even if they live abroad, Americans are answerable for US tax. Americans are expected to file a US tax return every year, irrespective of what they earn.

Although in most cases they are unlikely to face a bill due to the fact that they can offset what they pay to the tax authority in their country of residence.

However high earners can face a bill from the US Internal Revenue Service (the IRS) even after having paid substantial taxes to the Government in the country where they currently live.

Even if they have no intention of ever living in the United States, Americans expats get also taxed on the profit they make on selling their houses when they live abroad.

FATCA and its implications:

In 2010, new laws passed and made life even more difficult for American expatriates.

FATCA, short for The Foreign Account Tax Compliance Act, requires banks to declare savings held by US citizens to the American tax authorities.

The requirement applies to Americans living abroad, has caused some banks to decline opening accounts for US expats or inform them that they will close them down.

“Accidental Americans” is a term used to describe those who are considered citizens because they were born in the United States, even if they lived their entire life somewhere else. These Americans are among the group giving up their nationality.

Of those who renounced their US citizenship is Boris Johnson, the British Foreign Secretary who was born in New York.