Every year, a small but growing number of US citizens walk into a US consulate abroad and give up their American passport. Not because they hate the country, but because they can’t afford to keep paying taxes on their Bitcoin, Ethereum, and other crypto holdings. The US is the only country in the world that taxes its citizens on worldwide income-no matter where they live. For someone with millions in crypto gains, that means the IRS takes a cut every time their portfolio moves. So some choose to leave. Not just move abroad. Not just get a second passport. But fully renounce US citizenship.
Why Renounce? The Crypto Tax Burden
The IRS treats cryptocurrency like property. Every trade, every sale, every gift-even swapping Bitcoin for Ethereum-is a taxable event. If you bought Bitcoin at $5,000 and sold it at $70,000, you owe capital gains tax on the $65,000 profit. If you’re in the top tax bracket, that’s 20% plus 3.8% net investment income tax, plus state taxes. For someone with $10 million in crypto, that’s over $2 million in taxes. And that’s just on paper gains. If you hold, you don’t pay yet-but the moment you sell, trade, or even use crypto to buy a coffee, the IRS wants its share. Most countries don’t do this. If you live in Portugal, you pay zero tax on crypto gains after one year. In Germany, crypto held over a year is tax-free. Singapore doesn’t tax capital gains at all. For crypto investors who’ve built wealth outside the US, staying American means being taxed twice-once by your country of residence and again by the IRS. Renouncing citizenship ends that.The Real Cost: More Than Just a Fee
Renouncing US citizenship isn’t like canceling a subscription. It costs $2,350 just to file the paperwork. But that’s the cheapest part. The real price comes from the exit tax. If you’re a “covered expatriate,” the IRS treats you as if you sold everything you own the day before you renounce. That includes your crypto, real estate, stocks, even your private business. If your net worth is over $2 million, or your average tax bill over the last five years was over $206,000, you trigger the exit tax. The tax rate? Up to 23.8% on the “deemed sale” of all your assets. Let’s say you have $3 million in Bitcoin. The IRS says, “You sold it yesterday for $3 million.” You owe capital gains on the full appreciation since you bought it. If you bought it at $1,000 per coin, that’s $2.99 million in gains. At 23.8%, you owe nearly $710,000 before you even leave. And if you don’t file Form 8854-the official expatriation statement-you’re still a US taxpayer. The IRS doesn’t let you walk away. You’re flagged. Penalties pile up. You can’t fix it later.How the Smart Ones Do It
The people who pull this off without getting crushed by taxes don’t just walk in and say, “I’m done.” They plan for years. One common trick: gift assets before renouncing. If you transfer $1 million in crypto to your adult child in 2025, that money is no longer yours. It’s out of your “exit tax base.” But you can’t just give it away the week before renunciation. The IRS looks at gifts made in the year leading up to expatriation. If you give away $1.5 million in crypto in January 2025 and renounce in January 2026, that gift is still counted. Wait until 2026 to give it away, and it’s gone from your net worth. Another move: reduce your average tax liability. If your income spiked in 2020-2022 because you cashed out crypto, but now you’re not trading and your income is low, you might slip under the $206,000 threshold. You wait. You file your taxes. You let time do the work. Some set up trusts or family LLCs to hold assets. They keep control, but legally remove the assets from their name. It’s legal. It’s complex. It requires a team: a tax attorney, a cross-border accountant, and an estate planner who’s done this before.
Where Do They Go?
You can’t renounce without another passport. The US won’t let you become stateless. So most people get a second citizenship first. Portugal’s D7 visa lets you live there tax-free on passive income-crypto gains count. After five years, you can apply for citizenship. Malta offers citizenship by investment for €600,000+ in real estate or government bonds. You get a European passport, live tax-free on crypto, and then renounce your US citizenship. Switzerland is another favorite. No capital gains tax on private crypto holdings. Georgia offers a digital nomad visa and zero tax on foreign income. The goal isn’t just to escape the IRS. It’s to land somewhere that lets you keep your money, not just avoid paying it.What Happens After You Renounce?
You think it’s over. It’s not. Even after you give up your passport, the US still taxes you on income sourced from within its borders. Rent from a New York apartment? Taxed. Dividends from Apple stock? Taxed. Interest from a US bank account? Taxed. You’ll need to file Form 1040-NR and pay withholding taxes. You can’t live in the US anymore without a visa. You can visit as a tourist-but only for 90 days at a time under ESTA. Want to move back? You need a green card. And if you ever want to work in the US? You need a work visa. Your American passport is gone. Forever. And if you ever need to travel to the US for an emergency? You’re treated like any other foreigner. No special treatment. No diplomatic access. No right to vote. No protection from US embassies abroad.
Is It Worth It?
For most people? No. The exit tax alone wipes out the savings for anyone under $5 million in assets. The paperwork, legal fees, and ongoing compliance are a nightmare. And you lose everything that comes with being American: the ability to return, the safety net, the passport that gets you into 180+ countries. But for the few-those with $10 million or more in crypto, who’ve held for years, who’ve already moved abroad, who have a second passport lined up-it’s a calculated decision. It’s not about running away. It’s about choosing where you belong. The IRS isn’t going to change citizenship-based taxation anytime soon. So if you’re sitting on a fortune in Bitcoin and you’re living in Lisbon, Singapore, or Zurich, you’re not alone. You’re part of a quiet, growing group of people who decided their money matters more than their passport.Frequently Asked Questions
Can I renounce US citizenship if I owe back taxes?
No. You must be fully compliant with all US tax filings for the past five years. If you owe back taxes, penalties, or interest, you must pay them before renouncing. The IRS will block your application until you’re current. Even if you think you’re not liable, you still have to file returns. Failing to file is a red flag that makes you a covered expatriate automatically.
Do I still pay US taxes after renouncing?
You stop paying tax on your worldwide income-but you still pay tax on US-sourced income. That includes rent from US property, dividends from US stocks, interest from US banks, and wages from a US employer. You’ll file Form 1040-NR and pay withholding taxes. The IRS still tracks your US-linked income, even after you’re no longer a citizen.
Can I get my US citizenship back after renouncing?
No. Renouncing US citizenship is permanent and irreversible. There is no appeal, no exception, no backdoor. Once you sign the oath of renunciation at a US consulate, your citizenship ends. You can apply for a visa to live or work in the US, but you’ll be treated like any foreign national. Your American passport is gone forever.
What if I only have crypto and no other assets?
Your crypto counts. The IRS includes all assets-Bitcoin, Ethereum, NFTs, even crypto staking rewards-in your net worth calculation. If your total crypto holdings exceed $2 million at the time of renunciation, you’re a covered expatriate. The exit tax applies to the full unrealized gain since you acquired it. You can’t avoid it by saying, “It’s just crypto.” The IRS treats it as property, and it’s taxed like any other asset.
Is citizenship by investment worth it before renouncing?
For many, yes. Programs in Malta, Portugal, and Georgia offer legal residency or citizenship for investment, often in real estate or government bonds. Getting a second passport first lets you renounce without becoming stateless. It also gives you a stable base with favorable crypto tax laws. Without a second passport, you can’t renounce. So if you’re serious about this path, securing a second citizenship is step one-not step five.