By now we’ve all heard the modern-day fairytale of an American actress becoming engaged to Britain’s Prince Harry. Meghan Markle and her fianceé announced their engagement along with news that Markle will become a British citizen.
But, the question that remains is, will she become an expatriate and give up her US citizenship? If she does, relinquishing American citizenship comes with a major price tag.
There’s an administrative process that includes making an appointment at a U.S. embassy, signing forms and taking an Oath of Renunciation. That's where the money part comes in. First, you have to pay a $2,350 processing fee and several months later you’ll get a Certificate of Loss of Nationality.
It doesn't stop there. After notifying the IRS that you’re now an expatriate, you must pay an exit tax depending on your net worth. If your average income for the past five years is more than a specified amount ($151,000 for 2012, $155,000 for 2013, $157,000 for 2014, and $160,000 for 2015) or more than $2 million dollars, you’ll have to pay the exit tax.
One reason for denouncing citizenship can be to save money. America is one of the only countries citizens to pay taxes while they are living in another country. So, if you’ve lived in another country for decades, you’re still paying American taxes. So, becoming an expatriate and paying the exit tax may save someone money. Although it’s not just the rich who are renouncing their citizenship for financial reasons. In fact, the number of people becoming expatriates increased in 2016 from the year before. In 2016, 5,411 people choose to expatriate, compared to 4,279 in 2015. Nearly a decade ago, the number was sitting at 470.