Understanding Your Tax Obligations as a Former Green Card Holder
As a green card holder, you are generally required to file a U.S. income tax return and report worldwide income, regardless of where you reside. However, if you surrender your green card or the U.S. Citizen & Immigration Service (USCIS) determines that you have abandoned your green card, you will need to follow the nonresident alien requirements for filing a Form 1040-NR, U.S. Nonresident Alien Income Tax Return.
Tax Implications of Giving Up Your Green Card
Upon surrendering your green card, you may be subject to the expatriation tax if you meet certain criteria. The expatriation tax applies to U.S. citizens who have renounced their citizenship and long-term permanent residents (green card holders) who have ended their U.S. residency.
Filing Requirements for Former Green Card Holders
As a former green card holder, you are considered a nonresident alien for U.S. tax purposes. This means that you are only required to report and pay taxes on U.S.-sourced income. You will need to file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, to report your income and calculate your tax liability.
Expatriation Tax
The expatriation tax is a special tax that may apply to former green card holders who meet the following criteria:
- You have a net worth of $2 million or more, or
- You have an average annual net income tax liability of $160,000 or more for the five years preceding the year of expatriation
If you meet these criteria, you may be subject to a one-time exit tax on your worldwide assets.
Exceptions to the Expatriation Tax
There are certain exceptions to the expatriation tax, including:
- You can prove that you did not give up your green card for tax avoidance purposes.
- You are a citizen of a country with which the U.S. has an income tax treaty that includes a provision preventing double taxation.
- You are a dual citizen of the U.S. and another country and you continue to reside in the other country after giving up your green card.
Consequences of Failing to Comply with Tax Obligations
Failing to comply with your tax obligations as a former green card holder can result in significant penalties and interest charges. You may also be subject to criminal prosecution in severe cases.
Seeking Professional Advice
If you are considering giving up your green card, it is crucial to seek professional advice from a tax expert or immigration attorney. They can help you understand your tax obligations, determine if you are subject to the expatriation tax, and guide you through the process of surrendering your green card.
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FAQ
How do I file taxes if I abandon my green card?
How to avoid green card exit tax?
What happens if you give up your green card?
Do you still pay taxes if you give up US citizenship?
Can a green card holder get a tax refund?
As a green card holder, you must file a U.S. tax return Form 1040 each year and potentially pay a lump sum (or receive a refund, if you’ve had tax withheld from your paycheck during the year). Losing your U.S. permanent resident status doesn’t automatically mean you stop being a tax resident of the United States.
Does a green card holder have to file a tax return?
It is not true for green card holders. Even if you remain outside the U.S. for an entire year, you’ll still need to report your entire worldwide income. As a green card holder, you must file a U.S. tax return Form 1040 each year and potentially pay a lump sum (or receive a refund, if you’ve had tax withheld from your paycheck during the year).
Do green card holders have to pay exit tax?
As a heads up, green card holders who have been a resident of the US for eight of the past fifteen years will be subject to an exit tax during the abandonment process. On the other hand, green card holders of less than two years won’t have to pay an exit tax. What are the consequences of not filing my US tax return?
Do green card holders have to pay expatriation tax?
If a Green Card Holder has been a permanent resident for at least 8 of the past 15 years, they become subject to expatriation tax laws as well. In fact, it does not even require that the green card holder was a permanent resident for the full 8-years — or that they resided within the U.S. The Green Card Exit Tax 8 Years analysis is comprehensive.