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Does it make financial sense to renounce your U.S. citizenship?

August 5, 2015 By Cardinal Point Wealth

terry-ritchie-globe-and-mail-8-1-15
Americans living in Canada face tax-reporting obligations that can be burdensome—even to the point where one might consider renouncing their citizenship.

Our advice is to take a step back and think it through. As Terry Ritchie explained recently in this Globe and Mail video segment, renouncing one’s citizenship not only involves administrative hurdles, but can be quite expensive in terms of fees and taxes.

Americans must pay a $2,350 fee to the U.S. consulate. In addition, they must certify that they have been compliant through the filing of their IRS tax returns for the past five years. In addition, those who renounce their citizenship may be subject to two levels of income tax.

Those who have a net-worth over $2 million, or who have not filed returns in the previous five years, may face a capital gains “mark-to-market” tax as high as 23.8%. There is a fairly generous exemption that may eliminate some people from the mark-to-market tax. But those with qualified plans such as RRSPs or IRAs will face an immediate 30% tax on those assets.

Finally, bear in mind that you may not be able to change your mind: Provisions in U.S. law may bar those who renounce their citizenship from ever regaining it or being able to physically return to the U.S.

Filed Under: Americans Living in Canada, Articles, Cross-border Tax Planning, Video Tagged With: Americans living in Canada, cross border residence, Cross-border tax planning

 
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“Cardinal Point” is the brand under which dedicated professionals within Cardinal Point Capital Management, ULC provide financial, tax and investment advisory, risk management, financial planning and tax services to selected clients. Cardinal Point Capital Management, ULC is a US registered investment advisor and a registered portfolio manager in Canada (ON, QC, MB, SK, NS, NB, AB, BC). Advisory services are only offered to clients or prospective clients where Cardinal Point and its representatives are properly registered or exempt from registration. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.