US Tax Exile Calculator
Model the two paths available to US citizens seeking to reduce their worldwide tax burden. The FEIE path uses the Foreign Earned Income Exclusion ($126,500 in 2025) and Foreign Tax Credits to reduce US tax while living abroad. The renunciation path models the one-time exit tax cost and long-term saving from formally relinquishing citizenship.
Income
Wages, salary, self-employment.
Dividends, rental income, interest (FEIE does NOT exclude these).
FEIE Path
Tax paid to destination country — used as Foreign Tax Credit.
Income above $126,500 exclusion taxed at this rate.
Annual saving from a lower cost-of-living abroad.
Some states (CA, NY) pursue expats for state taxes even after leaving.
🇺🇸 Current US Tax
✈️ After FEIE + FTC
ℹ️ FEIE Key Facts (2025)
- Exclusion of $126,500 on earned income only.
- FICA (6.2% SS + 1.45% Medicare) still applies to earned income abroad.
- Passive income (dividends, rental) is NOT excluded by FEIE.
- You must still file a US return each year as an expat.
- Some states continue to assert tax residency — especially CA and VA.
Cumulative Saving Projection
Year-by-Year Projection
| Year | Annual Saving | Cumulative Saving | Net Benefit (after costs) |
|---|---|---|---|
| 1 | $55,863 | $55,863 | $55,863 |
| 2 | $55,863 | $111,726 | $111,726 |
| 3 | $55,863 | $167,589 | $167,589 |
| 4 | $55,863 | $223,452 | $223,452 |
| 5 | $55,863 | $279,315 | $279,315 |
| 6 | $55,863 | $335,178 | $335,178 |
| 7 | $55,863 | $391,041 | $391,041 |
| 8 | $55,863 | $446,904 | $446,904 |
| 9 | $55,863 | $502,767 | $502,767 |
| 10 | $55,863 | $558,630 | $558,630 |
💡 Costs this calculator doesn't include
- Private international health insurance — Medicare doesn't cover care received abroad, and there's no ACA marketplace once you've left. Comprehensive family cover commonly runs $5,000–$20,000+/year, more for older applicants.
- International school fees if you have children — typically $10,000–$30,000+ per child per year, plus enrolment fees, in destinations that don't offer free local schooling to foreign nationals.
- US life, disability, or umbrella insurance that may be cancelled or repriced once you become a non-resident — or once you renounce.
- After renouncing: loss of the unrestricted right to live in or re-enter the US — visits are typically capped at 90 days under a visa waiver or visa, with no guarantee of approval.
- The recurring cost of flights and accommodation to visit family back home — easy to underweight against the headline tax saving.
⚖️ Important: Simplified estimate only — consult a qualified US international tax attorney
The US taxes citizens on worldwide income regardless of residence (citizenship-based taxation, unique globally). FEIE, FTC, FBAR, FATCA, and the exit tax under IRC §877A are complex. Exit tax thresholds and exclusion amounts are indexed annually. Renunciation at a US consulate requires appointment, a $2,350 administrative fee, and cannot be undone. Post-renunciation gifts/inheritances to US persons are subject to IRC §2801. Always take professional advice from a dually qualified US and international tax specialist before proceeding.
Frequently asked questions
Why are US citizens taxed even when living abroad?
The United States operates a citizenship-based taxation (CBT) system — the only major country in the world (alongside Eritrea) to do so. US citizens and green card holders must file US tax returns and pay US tax on their worldwide income regardless of where they live. Moving abroad does not automatically eliminate US tax obligations. To completely escape the US tax system, citizens must formally renounce citizenship.
What is the Foreign Earned Income Exclusion (FEIE)?
The FEIE (IRC §911) allows qualifying US citizens and resident aliens living abroad to exclude a set amount of foreign earned income from US taxation. For 2025, the exclusion is $126,500, indexed annually for inflation. To qualify, you must have a tax home in a foreign country and either pass the bona fide residence test (full calendar year as a bona fide resident of a foreign country) or the physical presence test (330 full days in foreign countries during any 12-month period). The FEIE only applies to earned income — wages, salary, self-employment. It does NOT exclude dividends, rental income, interest, or capital gains.
What is the Foreign Tax Credit (FTC)?
The FTC allows US taxpayers to take a dollar-for-dollar credit for income taxes paid to a foreign country, reducing their US tax liability. The FTC is particularly powerful for citizens living in high-tax countries like the UK, Germany, or Australia, where the foreign income tax rate may equal or exceed the US rate, effectively eliminating additional US tax. However, you cannot use FTC on income excluded via FEIE — you must choose for each dollar of income. FICA (Social Security and Medicare) contributions are not offset by FTC and remain owed even from abroad.
What is the exit tax when renouncing US citizenship?
Under IRC §877A, "covered expatriates" face a mark-to-market exit tax — the IRS treats all worldwide assets as if sold on the day before expatriation. A covered expatriate is someone with net worth ≥ $2,000,000 or average annual net income tax over the preceding 5 years ≥ $201,000. Gains above the exclusion amount ($866,000 in 2025, indexed annually) are taxed at capital gains rates (up to 23.8% including NIIT). Tax-deferred accounts (401k, IRA) are treated as fully distributed on exit at ordinary income rates (up to 37%).
Does renouncing citizenship affect Social Security benefits?
Renouncing citizenship does not forfeit Social Security benefits you have already accrued — you can still collect benefits you have earned. However, benefits paid to non-resident aliens may be subject to 30% withholding (reduced by tax treaty). After renunciation, US-source income (dividends from US companies, US rental income) is still subject to 30% withholding tax, though this can often be reduced by a tax treaty between the US and your new country of residence.
Which states continue to tax expats?
California, Virginia, New Mexico, and South Carolina are the most aggressive in asserting continuing residency over expats who have not clearly domiciled elsewhere. California in particular has no bright-line rule — it looks at whether you have maintained "California domicile" even after leaving. Texas, Florida, Washington, Nevada, Wyoming, South Dakota, and Alaska have no state income tax, making them ideal "launching pad" states for expats. If you plan to live abroad long-term, establishing clear domicile in a no-income-tax state before departure can be important.