The Cost of Moving Abroad
May 26, 2013

Abstract
“Expatriates who qualify as “covered” are subject to the exit tax” (Bowman, 2012, para. 4). There are various succession taxes that the I.R.S. imposes on the estate and gifts make on behalf of expatriates. U.S. citizens must report their worldwide income to the IRS even if they are paying taxes somewhere else (Wood, 2012). Before deciding to ship abroad there are certain things a U.S. citizen can do to lower their overall tax liability.

The Cost of Moving Abroad People thinking of retiring to their favorite tropical island may want to think long and hard about it. When deciding to move abroad one must consider not only the administration costs, but also the tax burden. In the past all a person had to do was turn in their passports. Now there is a complicated process in place to cover some of the loopholes that have been taken advantage of. If a person moves to another country and establishes dual citizenship they are still liable to pay U.S. taxes. Completely renouncing your citizenship has become a major head ache. Exit taxes and succession taxes will be the number one hurdle for the wealthy taxpayer to overcome. The Heroes Earnings Assistance and Relief Tax Act (HEART Act), created a category of expatriates called “covered expatriates”, who are subject to a different tax regime (Bowman, 2012). One must determine whether a potential expatriate will be a covered expatriate in order to determine the tax implications for the expatriate and the potential beneficiaries under his or her estate plan (Bowman, 2012). A covered expatriate is one who meets one or both of the tax liability test, and the net worth test, or one who fails the tax certification test (Bowman, 2012). The tax liability test is satisfied if the expatriate’s average annual net income tax liability for the five taxable years preceding the