US Exit Tax Calculator (§877A)

When a US citizen renounces citizenship — or a long-term green card holder abandons their card — the IRS may impose an exit tax under IRC §877A. This only applies to "covered expatriates." This calculator runs the three covered-expatriate tests, then estimates your exit tax from the mark-to-market deemed sale and IRA deemed distribution.

The three covered-expatriate tests explained

Test 1: Net income tax liability (threshold: $211,000 for 2026)

You are a covered expatriate if your average annual net income tax for the 5 taxable years ending before expatriation exceeds $211,000 (2026 inflation-adjusted amount).¹ This is the actual tax on your Form 1040 line 24 — not your gross income. Average it over 5 years. A single high-income year (say, a large capital gain or stock option exercise) that spiked taxes doesn't trigger coverage if your other four years were normal. But consistent high earners — say, someone paying $250K+ in taxes annually — are covered by this test alone.

Test 2: Net worth (threshold: $2,000,000)

You are a covered expatriate if your total net worth — worldwide assets minus liabilities, at fair market value — is $2,000,000 or more on the day before your expatriation date. This threshold has not been indexed for inflation since §877A was enacted in 2008. In 2008, $2M was firmly upper-class. In 2026, $2M is reachable for many professionals in high-cost cities: a home with equity, a 401(k) and IRA, and a brokerage account. US citizens living abroad often have assets spread across multiple countries, all of which count toward this test.

Test 3: Five-year compliance failure

Even if you pass both financial tests, you are a covered expatriate if you cannot certify — on Form 8854 — that you complied with all US federal tax obligations for the 5 years before expatriation. This means: timely filing, paying all taxes, and filing all required information returns (FBAR FinCEN 114, Form 8938, Form 5471 for foreign corporations, Form 8621 for PFICs, Form 3520 for foreign trusts). Missing even one information return in one year can disqualify you from certification. Many expats who believed they had minimal US tax liability are actually covered expatriates because they didn't know about FBAR or PFIC reporting.

The fix: the IRS Streamlined Foreign Offshore Procedures (SFOP) let qualifying non-willful filers catch up with back taxes and 0% penalties. If you'd be covered only by Test 3, addressing compliance before you expatriate eliminates this exposure entirely.

How the exit tax is calculated

Mark-to-market deemed sale (§877A(a))

If you're a covered expatriate, IRC §877A(a) treats you as having sold all your property at fair market value on the day before your expatriation date. Net unrealized gain above the $910,000 exclusion (2026)¹ is recognized and included in your final US income tax return. The exclusion applies to your total net gain across all mark-to-market assets — not per-asset. Losses offset gains: $1.4M in stock gains and $300K in real estate losses leaves $1.1M net gain, of which $190,000 is taxable.

Long-term gains are taxed at 20% LTCG + 3.8% NIIT = 23.8%. Short-term gains are taxed at ordinary income rates plus NIIT. Covered expatriates are nearly always above the NIIT threshold ($200K single / $250K MFJ), so NIIT almost always applies.

What's included: US and foreign brokerage accounts, real estate, business interests, cash, foreign accounts. Not subject to mark-to-market (but still taxed under separate rules): eligible deferred compensation (401k/pensions — 30% withholding at distribution), specified tax-deferred accounts (IRAs — deemed distributed now), interests in non-grantor trusts (separate deemed distribution rules).

IRA and pre-tax 401(k) — deemed distribution (§877A(e)(1))

Tax-deferred accounts are carved out of mark-to-market but are not exempt. Under §877A(e)(1), a covered expatriate's interest in any "specified tax-deferred account" — traditional IRA, HSA, Archer MSA, Coverdell ESA — is treated as distributed in full on the day before expatriation and included in ordinary income. No $910,000 exclusion applies to this amount. The 10% early withdrawal penalty is waived (§877A(e)(2)).

Roth IRA exception: Only the earnings portion (above your contribution basis) is included. If you contributed $200K to a Roth IRA worth $350K, only $150K in earnings is taxable — not the full $350K. This calculator uses the full IRA balance for the traditional/pre-tax calculation and does not separately model Roth basis recovery. If you have significant Roth basis, your actual liability will be lower.

Eligible deferred compensation (§877A(d))

Qualified 401(k) and pension plans from US employers are handled differently: you don't pay the exit tax now. Instead, the plan payor withholds 30% from each future distribution and remits it to the IRS. You must notify the payor using Form W-8CE that you are a covered expatriate before the first distribution. This calculator does not include eligible deferred comp — factor it in separately at 30% of expected distributions.

Ineligible deferred compensation (non-qualified deferred comp, phantom stock, etc.) is not eligible for the 30% withholding treatment and is instead included in mark-to-market income at present value in the year of expatriation.

Planning to reduce the exit tax

• Harvest losses before expatriation. Any unrealized losses in your portfolio offset mark-to-market gains. Run a tax-loss sweep in the months before renouncing.
• Roth conversions before expatriation. Converting pre-tax retirement money to Roth before you renounce lets you pay ordinary income tax (likely at your current rate) rather than having the full traditional balance deemed distributed at the top rate on exit. The Roth earnings exclusion (only earnings taxable) also helps over time.
• IRA withdrawals at lower rates. If you have low-income years before expatriation, drawing down your traditional IRA at 22% or 24% is better than the deemed-distribution at 37%.
• Each spouse gets the $910K exclusion separately. For married couples, timing renunciations in different tax years doubles the exclusion — $1.82M of gain could be excluded in total. Requires careful coordination.
• Installment election under §877A(b). For certain mark-to-market property, you can elect to defer payment by posting security and paying interest. This preserves cash but requires annual filings and loses the benefit of tax treaties.
• Fix compliance before renouncing. If you'd be covered only by Test 3, use the streamlined procedures to clean up your filing history first — eliminating the exit tax entirely.

Sources

1. IRS.gov — Expatriation Tax: IRC §877A covered-expatriate tests, 2026 net income tax threshold ($211,000), and 2026 gain exclusion ($910,000)
2. IRC §877A — Tax responsibilities of expatriation (Cornell Law School LII)
3. IRS Instructions for Form 8854 — Initial and Annual Expatriation Statement
4. IRS Rev. Proc. 2025-67 — 2026 inflation-adjusted amounts including §877A thresholds (via Tax Notes)
5. IRS Topic 409 — Capital Gains and Losses: 20% top LTCG rate for 2026
6. IRS Topic 559 — Net Investment Income Tax: 3.8% surcharge above $200,000/$250,000

Tax values verified May 2026. This calculator is an educational estimate and does not constitute tax or financial advice. Exit tax situations require specialist review — actual liability depends on foreign tax credits, Roth IRA basis, ineligible deferred compensation, state taxes, and planning strategies not modeled here.