Am I a Covered Expatriate? The Three Tests
You are a covered expatriate if you meet any one of three tests on the day you expatriate: a net worth of $2,000,000 or more, an average annual income tax above $211,000 (2026) for the prior five years, or an inability to certify five years of US tax compliance. Only covered expatriates can owe the US exit tax, and most people who renounce are not covered.
This single determination is the gate. If you are not a covered expatriate, the mark-to-market exit tax does not apply to you, no matter how the renunciation is reported. If you are, the deemed-sale rules of IRC §877A come into play. So the first question is never "how much is the exit tax," it is "am I covered."
Test 1: The net worth test
If your net worth is $2,000,000 or more on your expatriation date, you are a covered expatriate. Net worth here means the fair market value of everything you own worldwide, minus your liabilities. It includes your share of jointly held property, retirement accounts, business interests, and your home.
One detail trips people up: this $2,000,000 figure is fixed in the statute. Unlike the income threshold and the gain exclusion, it is not adjusted for inflation, so it has stayed at $2 million since 2008. Over time, ordinary asset growth pushes more people over the line.
COVERED if net worth ≥ $2M
Test 2: The income tax test
You are covered if your average annual net income tax for the five years ending before expatriation exceeds the threshold for your year of departure. This is a test of tax paid, not income earned. A taxpayer can earn a high salary and still fall below the line if deductions, credits, and the foreign tax credit reduce the actual US tax.
| Expatriation year | Average annual income tax threshold |
|---|---|
| 2021 | $172,000 |
| 2022 | $178,000 |
| 2023 | $190,000 |
| 2024 | $201,000 |
| 2025 | $206,000 |
| 2026 | $211,000 |
Source: IRS expatriation tax guidance and Form 8854 instructions. See sources.
Test 3: The certification test
Even if your net worth and income are modest, you become a covered expatriate if you cannot certify on Form 8854 that you have met all federal tax obligations for the five years before you expatriate. This includes filing returns and any required information forms such as the FBAR and Form 8938.
This is the trap for "accidental Americans" and long-time non-filers abroad. The wealth tests may not apply, but a gap in past filings can make you covered by default. The fix is to get compliant (often through a streamlined procedure) before you expatriate, so you can sign the certification truthfully.
CHECK your last 5 years of filings
Exceptions: who escapes covered status
Two narrow exceptions let you avoid covered-expatriate status even if you exceed the net-worth or income test. Both still require the five-year certification.
- Dual citizen at birth. If you were a citizen of the US and another country at birth, still hold and are taxed by that other country, and were a US resident for no more than 10 of the last 15 years, you are not covered.
- Certain minors. If you expatriate before age 18½ and were a US resident for no more than 10 years before that, you are not covered.
The dual-citizen path is the more common one. See the full conditions in the dual-citizen exception guide. For all the current numbers in one place, see the 2026 thresholds.
What being covered actually costs
Covered status does not automatically mean a large bill. The exit tax only reaches unrealized gain above the year's exclusion, which is $910,000 for 2026. Many covered expatriates with gains under that amount owe little or nothing on the deemed sale, though separate rules for retirement accounts, deferred compensation, and trusts can still apply. Run your numbers in the exit tax calculator, then read about legal ways to reduce the exit tax.
If you hold a green card rather than citizenship, the tests apply only if you are a long-term resident. See the green card exit tax guide.