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Why More U.S. Expatriates Are Turning In Their Passports

Time recently published an article talking about how more Americans abroad are giving up their citizenship mostly due to heavier taxation.

On a related note, I recently wrote a piece interviewing Andy Coyne from Association of Americans Resident Overseas (AARO) for the April newsletter of My American Market (pages 4-5), and taxation is one of the main topics.

This is certainly a controversial issue, giving up U.S. citizenship. Have any of my readers done this or are considering doing this? Why or why not?

excerpts from the Time article:

John says that since he moved to Europe 25 years ago, U.S. tax regulations have become more and more burdensome. “Every time I turn around, I get smacked in the face with some new restriction as a result of being a U.S. citizen abroad,” he says. And because the U.S. government requires other countries to abide by its banking and financial rules when dealing with expatriates, Americans living abroad are often denied services because of the increasingly complex legalities and logistics involved in serving U.S. customers. Many U.S. expats report being turned away by banks and other institutions in their countries of residence only because they are American, according to American Citizens Abroad (ACA), a Geneva-based worldwide advocacy group for expatriate U.S. citizens.

“We have become toxic citizens,” says ACA founder Andy Sundberg. Paradoxically, by relinquishing their U.S. citizenship, expats can not only escape the financial burden of double taxation, but also strengthen the U.S. economy, he says, adding, “It will become much easier for these people to get a job abroad, and to set up, own and operate private companies that can promote American exports.”

  1. April 22nd, 2010 at 15:48 | #1

    It is becoming increasingly “inconvenient,” that’s for sure. The tax filing requirements are ridiculous (as a US citizen and *small* business owner in France, I can barely stomach having to file Schedule C every year, or in my case, pay someone to file for me — give us a break!). I was also just “fired” as a client by bank ING Direct…resulting in even more inconvenience having to figure out what to do with the tax-sheltered investments I held with ING. But I am not sure I’d “turn in my passport” because of any of that. That’s a pretty serious step! I have dual citizenship and consider myself permanently settled in France, but as long as my roots and my family are in the US, I think I’d want to hold on to my citizenship!

  2. Karl
    April 23rd, 2010 at 07:04 | #2

    If you live in an area with higher taxes than the US, you certainly have added cost of compliance but you probably don’t pay a lot of taxes. I live in an area with lower taxes than in the US and end up paying vast sums of money to the U.S. even though I haven’t lived there for 15 years and all my income comes from foreign sources. My local friends tell me “it’s a very expensive hobby you have, being American”.

  3. April 23rd, 2010 at 07:08 | #3

    Sara, congratulations on your new company. I just founded a company in France this year as well. I’ve been so occupied with French administrative issues that I didn’t even know about the IRA Schedule C !
    At any rate, I don’t think that would be a good enough reason to give up citizenzhip! As dual citizens, we have been enriched by two countries and owe something to both.

  4. April 29th, 2010 at 16:52 | #4

    Bonjour! I always debated becoming a US citizen and taxes were one of my main concerns. I’m French living in San Francisco. Could you give me some guidance on what will happen if I become a US citizen? Merci.

    • April 30th, 2010 at 10:40 | #5

      Bonjour Catherine,

      Thanks for your message. I’m not an expert on American naturalization process but these resources could perhaps help:
      http://www.uscis.gov/portal/site/uscis
      http://www.consulfrance-sanfrancisco.org/
      http://www.irs.gov/

      bon courage! Michael

    • Cynthia Walters
      May 1st, 2010 at 05:33 | #6

      Hi Catherine,
      I think taxes here in the us are pretty strait forward depending on what you do for a living if you are self employed (travaille a ton compte) like me I am an independent contractor and I work as a real estate agent I pay self employment taxes and my own social security taxes and my state (VA) taxes and its all based on my income.
      I normally pay my taxes every 4 months the IRS has specific dates on when to send them a payment and my payments are based on my previous year income.
      if you own property in the US you can deduct or write off the real estate property taxes you pay as well as the taxes you pay for your mortgage payment the typical taxes are between 15% at the lowest and up to 38% if you earn a lot of income .

      If you are not self employed and have no children and do not own a house then you won’t get many tax breaks as far as write offs so the govt will take more money from you thats why if you have your own business or kids or a house you get to keep more of your money.

      One thing here compared to france is if you own a house for at least 2 yrs and sell it and make a profit you don’t have to pay any taxes and I think in france you pay no matter what.

      I have lived in france for over 10 yrs before moving back to the US and I think life in france was much better for the french before the euro and taxes were lower.
      but comparing the 2 I think you will find the taxes much less here in the usa you can always talk to a tax professional and get advice they would be happy to better explain how it would work for your situation.
      if I could get la double nationalite now I would but I left france years ago and now its too late for me to get it unless I marry a french person,move back to france and live there for 5 yr and have a french job or work for a french company in the us for a while and document que je contribue a l’economie francaise pour plusieurs annees a la suite pour obtenir ma nationalite francaise.
      Cynthia

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