Denaturalized U.S. Citizens Forced to Exit Face Unavoidable Exit Tax

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Key Takeaways

• Denaturalized citizens are subject to the expatriation tax as of July 13, 2025, similar to voluntary renunciants.
• Covered expatriates owe tax on unrealized gains worldwide exceeding $820,000 exclusion for 2025.
• Affected individuals must file IRS Form 8854 and may pay installment tax if meeting requirements.

As of July 13, 2025, there have been important changes and clarifications regarding the treatment of denaturalized citizens in the United States 🇺🇸, especially when it comes to the expatriation tax, also known as the exit tax. These changes affect not only those who voluntarily give up their citizenship but also those who lose it against their will. This update explains what has changed, who is affected, what actions are required, and what these developments mean for people with pending applications or those who may face denaturalization in the future.

Summary of What Changed

Denaturalized U.S. Citizens Forced to Exit Face Unavoidable Exit Tax

The most significant update is the clear confirmation that denaturalized citizens—those who have their U.S. citizenship revoked by the government—are now firmly subject to the same exit tax rules as people who voluntarily renounce their citizenship. This means that if you lose your U.S. citizenship, whether by choice or by force, you cannot avoid the expatriation tax. This rule also applies to certain long-term Green Card holders who lose their permanent resident status after living in the United States 🇺🇸 for a long time.

This development follows increased efforts by the U.S. government to revoke citizenship from naturalized Americans, especially in cases where fraud or other legal issues are found in the naturalization process. As reported by VisaVerge.com, these changes have brought new attention to the financial and legal consequences for those affected.

Who Is Affected

The following groups are directly impacted by these changes:

Denaturalized citizens: People who have had their U.S. citizenship revoked by the State Department or a court, often due to findings of fraud or other legal violations during the naturalization process.
Voluntary expatriates: Individuals who choose to give up their U.S. citizenship.
Long-term Green Card holders: Lawful permanent residents who have lived in the United States 🇺🇸 for at least 8 of the last 15 years and then lose their status.
Families of denaturalized citizens: Family members may also face tax consequences, especially if they receive gifts from a covered expatriate.

Effective Dates

The most recent clarifications and enforcement efforts took effect on July 13, 2025.
The exit tax rules themselves have been in place for several years, but their application to denaturalized citizens is now being enforced more strictly.

Required Actions for Affected Individuals

If you are facing denaturalization or are a long-term Green Card holder losing your status, you must take the following steps:

Understand Your Status: If you receive notice that your citizenship is being revoked, or your Green Card status is ending, you need to know that the expatriation tax rules may apply to you.
Determine the Date of Loss: The date your citizenship or residency officially ends is the key date for tax purposes.
File IRS Form 8854: You must file Form 8854 (Initial and Annual Expatriation Statement) with the IRS. This form reports your expatriation and certifies that you have complied with all U.S. tax obligations for the five years before losing your status.
Check If You Are a Covered Expatriate: You are a “covered expatriate” if, on the date you lose citizenship or residency, you meet either of these:
- Your net worth is $2 million or more, or
- Your average annual net income tax liability for the five years before expatriation is over $206,000 (for 2025).
Calculate the Exit Tax: If you are a covered expatriate, you must pay a capital gains tax on the increase in value of all your worldwide assets as if you sold them the day you lost citizenship or residency. There is an exclusion amount (about $820,000 for 2025) that you can subtract from your total gains.
Pay the Exit Tax: The tax is due on the unrealized gains. In some cases, you may be able to pay in installments over five years if you meet certain requirements.
Continue U.S. Tax Filings If Needed: Even after expatriation, you may need to file U.S. tax returns for any U.S.-source income and comply with gift tax rules if you give large gifts to U.S. persons.

Implications for Pending Applications and Current Residents

If you are a naturalized citizen with a pending investigation or legal challenge to your citizenship, or a Green Card holder facing possible loss of status, it is important to prepare for the possibility of being treated as a covered expatriate. This means:

Start gathering records of your assets, income, and tax filings for the past five years.
Consult with a tax attorney or immigration lawyer who understands both denaturalization and expatriation tax rules.
Consider early tax planning to reduce your risk of being classified as a covered expatriate, if possible.

Details of the Exit Tax For denaturalized citizens

The exit tax is a special tax that applies when someone gives up U.S. citizenship or long-term residency. For denaturalized citizens, this tax is especially harsh because it applies even if the loss of citizenship was not their choice.

Mark-to-Market Tax: The IRS treats all your worldwide assets as if you sold them on the day you lost citizenship. You must pay tax on the increase in value (capital gains) of these assets, even if you did not actually sell them.
Assets Included: This includes everything you own worldwide—homes, cars, jewelry, investments, retirement accounts, and even personal property.
Exclusion Amount: For 2025, you can exclude the first $820,000 of gains from tax. Anything above that is taxed.
Gift Tax for Family: If you are a covered expatriate and give gifts to U.S. persons (including family members) that are over $18,000 in 2025, the recipient may have to pay a special tax on the gift.

Why These Changes Matter

The main reason for these changes is to prevent people from giving up their citizenship just to avoid paying U.S. taxes. However, the rules now also catch people who lose citizenship against their will, such as denaturalized citizens. This has raised concerns among tax and immigration experts.

Financial Burden: Many denaturalized citizens are surprised to find they owe large amounts of tax, even if they did not plan to leave the United States 🇺🇸 or sell their assets.
Human Rights Concerns: Some experts, including Virginia La Torre Jeker, have pointed out that applying the exit tax to people who are forced to leave the country raises questions of fairness and human rights.
Ongoing Tax Obligations: Even after losing citizenship, some people may still have to file U.S. tax returns if they have U.S.-source income or if they give gifts to U.S. persons.

Step-by-Step Process for Those Facing Denaturalization and Exit Tax

Here is a simple breakdown of what happens if you are facing denaturalization and the exit tax:

Denaturalization Process Begins: The government starts legal action to revoke your citizenship, usually because of fraud or other legal reasons.
Official Loss of Citizenship: Once the process is complete, you receive notice that you are no longer a U.S. citizen. This is the key date for tax purposes.
IRS Notification: You must notify the IRS by filing Form 8854. This form asks for details about your assets, income, and tax compliance.
Covered Expatriate Test: The IRS checks if you meet the net worth or income tax liability thresholds.
Calculate Tax Owed: You or your tax advisor must figure out the total unrealized gains on your worldwide assets, subtract the exclusion amount, and calculate the tax owed.
Pay the Tax: The tax is due when you file your final tax return. In some cases, you can apply to pay in installments.
Future Tax Filings: If you have U.S.-source income or give gifts to U.S. persons, you may need to keep filing U.S. tax forms.

Expert Analysis and Perspectives

Virginia La Torre Jeker, a leading tax attorney, has warned that the exit tax can be financially devastating for denaturalized citizens. Many people do not expect to lose their citizenship, so they are not prepared for the sudden tax bill. The rules do not make exceptions for people who lose citizenship involuntarily, which many experts believe is unfair.

Tax professionals also stress the importance of early planning. If you are a naturalized citizen or long-term Green Card holder, you should keep your tax filings up to date and know your net worth. This can help you avoid surprises if you ever face denaturalization or loss of status.

Key Stakeholders and Officials

Several government agencies and professionals are involved in this process:

U.S. Department of State: Handles the legal process of revoking citizenship and issues certificates of loss of nationality.
Internal Revenue Service (IRS): Enforces the expatriation tax rules, processes Form 8854, and collects the exit tax.
Tax and Immigration Lawyers: Help individuals understand their rights and obligations.
Advocacy Groups: Watch for possible human rights violations and help people understand their legal options.

Future Outlook and Pending Developments

There is ongoing debate in Congress and among tax professionals about whether the exit tax should apply to people who lose citizenship involuntarily. Some lawmakers and advocacy groups are calling for changes to the law to make it fairer for denaturalized citizens. However, as of July 2025, no official changes have been made.

It is important for affected individuals to keep up with news from Congress and the IRS. Changes to the law or new guidance could come in the future, especially as more people become aware of the issue.

Official Resources and Where to Get Help

If you are affected by these changes or want to learn more, here are some official resources:

The IRS International Taxpayers page provides detailed information about the expatriation tax, including instructions for Form 8854.
The U.S. Department of State’s Bureau of Consular Affairs offers information on citizenship revocation and loss of nationality procedures.
Tax and immigration lawyers, such as those led by Virginia La Torre Jeker, can provide personalized advice.

Actionable Takeaways

If you are a naturalized citizen or long-term Green Card holder, keep your tax filings current and know your net worth.
If you receive notice of denaturalization, act quickly to understand your tax obligations and file Form 8854.
Consult with a qualified tax or immigration lawyer to plan for the exit tax and avoid penalties.
Stay informed about possible changes to the law by checking official IRS and State Department updates.

Conclusion

The recent enforcement of exit tax rules for denaturalized citizens marks a major shift in how the United States 🇺🇸 treats people who lose their citizenship, whether by choice or by force. The financial and legal consequences can be severe, so it is important for affected individuals to act quickly, seek professional advice, and stay informed about future changes. For more in-depth analysis and updates, VisaVerge.com reports that ongoing legal and policy discussions may lead to further changes in the coming years.

Learn Today

Denaturalized Citizens → People who lose U.S. citizenship involuntarily through government revocation, often after legal or fraud findings.
Expatriation Tax → A tax applied on unrealized gains when a person loses U.S. citizenship or long-term residency.
Covered Expatriate → An individual with a net worth over $2 million or high income tax liability facing exit tax.
Form 8854 → IRS form that reports expatriation and certifies compliance with U.S. tax obligations before losing status.
Exit Tax → Capital gains tax on worldwide assets as if sold on the date of citizenship or residency loss.

This Article in a Nutshell

Changes on July 13, 2025, clarify that denaturalized citizens face the same exit tax as voluntary expatriates, impacting tax obligations. This strict enforcement affects naturalized citizens, long-term Green Card holders, and their families, requiring critical IRS filings and financial planning to comply with U.S. expatriation tax laws.
— By VisaVerge.com