There’s a quiet revolution happening among Americans living abroad, and it has nothing to do with who’s in the White House, which war is trending on the news, or what’s happening to the dollar. It’s more personal than that — and more permanent.
Each year, thousands of Americans are walking into U.S. embassies and consulates around the world, raising their right hand, and formally renouncing their citizenship. Not out of rage. Not to make a statement on social media. But because, for many of them, holding a U.S. passport has become more of a burden than a privilege.
In 2020 alone, 6,705 Americans officially gave up their citizenship — a staggering 260 percent jump from the year before. And while headlines love to frame this as a political exodus, the real story is far more complicated, far more human, and frankly, far more interesting.
The Tax Nobody Told You About
Here’s a fact that shocks most Americans when they first hear it: the United States is one of only two countries in the world — the other being Eritrea — that taxes its citizens based on citizenship, not residency.
That means if you’re an American living in Berlin, Barcelona, or Bangkok, you owe the IRS a tax return every single year. Doesn’t matter if you haven’t lived in the U.S. in a decade. Doesn’t matter if every dollar you earn comes from a foreign employer, gets deposited into a foreign bank, and gets spent in a foreign currency. Uncle Sam still wants his slice — or at the very least, his paperwork.
And the paperwork is extraordinary. Foreign bank account disclosures. Offshore asset declarations. Informational returns for any foreign business you might own. The compliance costs — both in money paid to expat tax specialists and in sheer administrative weight — can run thousands of dollars per year for someone of perfectly average means.
For Americans who have truly built their lives elsewhere — who own homes, run businesses, and are raising families abroad — the U.S. passport starts to feel less like a golden ticket and more like an anchor.
The Straw That Broke It: FATCA
In 2010, the U.S. government passed the Foreign Account Tax Compliance Act, better known as FATCA. Its stated goal was to catch wealthy Americans hiding money in offshore accounts. In practice, it also made life genuinely difficult for ordinary Americans living abroad.
Under FATCA, foreign banks are required to report U.S. account holders to the IRS. The compliance burden this places on those banks is significant — so significant that many foreign financial institutions simply decided to stop banking Americans altogether. It became easier to turn an American away at the door than to deal with the reporting requirements.
Expats started finding themselves unable to open bank accounts. Mortgages became harder to get. Investment accounts were closed without warning. In some countries, being American became, quietly, a financial liability.
It was FATCA more than any election or geopolitical shift that accelerated the renunciation numbers. People weren’t renouncing because they stopped loving America. They were renouncing because America’s financial bureaucracy was making their actual lives, in the actual countries where they lived, increasingly unworkable.
What Renouncing Actually Means
Giving up U.S. citizenship is not a decision made lightly, and it’s worth being clear about what it entails. Once you renounce, you lose the right to vote in U.S. elections. You lose the right to live or work in the United States without a visa. You lose U.S. government protection abroad. And your children, if born after renunciation, won’t automatically receive U.S. citizenship.
It’s also not cheap or quick. You have to appear in person at a U.S. embassy or consulate. You sign an oath of renunciation before a consular officer. You pay a $2,350 administrative fee — one of the highest renunciation fees in the world, introduced in 2014 after the government raised it by 422 percent. And depending on your financial situation, you may be subject to an “exit tax” that treats your worldwide assets as if they were sold on the day you renounced, with any resulting gains potentially taxed immediately.
The process typically involves five stages: consulting a U.S. immigration attorney, filing all outstanding U.S. tax returns (you must be tax-compliant before renouncing), scheduling an appointment at a U.S. consulate, attending the formal renunciation appointment, and waiting for a Certificate of Loss of Nationality to be processed — which can take months.
For a deep look at the motivations and mechanics behind this decision, the full breakdown of why and how Americans are renouncing their citizenship — particularly among those who’ve built lives in Europe — captures how calculated and considered this process really is.
The People Who Are Actually Doing It
Forget the stereotype of the disgruntled celebrity threatening to move to Canada after a bad election. The people renouncing U.S. citizenship in meaningful numbers tend to look very different.
They’re the American-born professional who moved to Germany for a job in their 30s, married a German, bought a house, had kids, and now — fifteen years later — has no meaningful connection to the U.S. financial system but is still required to file a 40-page tax return every April.
They’re the dual citizen who grew up in Europe with an American parent, has never actually lived in the United States, and is being asked by their bank to prove they’re not a tax evader.
They’re the small business owner in Southeast Asia whose foreign corporate structure triggers IRS reporting requirements that cost more in compliance fees than the business actually earns in profit.
These aren’t edge cases. They’re a growing demographic — and they’re making a rational economic decision in the face of a system that wasn’t designed with them in mind.
The Bigger Question Nobody’s Asking
The real story in these renunciation numbers isn’t about disloyalty or political disillusionment. It’s about the gap between what American citizenship promises and what it actually delivers for people who’ve chosen to live elsewhere.
For those people, the passport is simultaneously a point of deep personal identity and a source of genuine bureaucratic hardship. Many of them spend years trying to make it work — filing returns, paying compliance specialists, navigating FATCA restrictions — before they conclude that the cost, in time, money, and stress, simply isn’t justified by the benefits they’re actually using.
Los Angeles, more than almost any other American city, is home to people with layered, hyphenated identities — Americans who are also something else, people who move fluidly between cultures and countries. The conversation about what American citizenship means, what it costs, and when it stops being worth it is one that’s already happening in this city, quietly, at dinner tables and in expat forums and in conversations with tax lawyers.
It’s worth having it a little more loudly.
This article is intended for general informational purposes and does not constitute legal or tax advice. Anyone considering renunciation of U.S. citizenship should consult a qualified immigration attorney and expat tax specialist before proceeding.