Are More Wealthy People Giving Up The U.S. Passport To Avoid Taxes?

Could the wealthiest people in the U.S. really giving be giving up their citizenship to save money on taxes? Wealth Bulletin has a report that says that some wealthy Americans who live abroad are so determined to shed the yoke of American taxation that they are willing to surrender their U.S. passports. The U.S. tax laws require those living outside the U.S. to continue to pay taxes on worldwide income no matter where they live.

Those who do choose to leave will be subject to something known as the exit tax. The exit tax affects both US citizens who expatriate and long-term US permanent residents who give up their green cards which they have held for eight of the last 15 years. Those who qualify for the exit tax have a net worth of over $2 million and an average net U.S. income tax liability of greater than $139,000 for the five year period prior to expatriation. Those who want to leave pay a one-time tax on gains over $600,000. Isla Offshore Advisor has more of the salient details including the fact that the tax is due 90 days after giving up your citizenship. Right now, when just about everyone's net worth is lower it is seeming like an opportune time for many to take the leap.

Wealth Bulletin quotes Jay Krause, a partner at private-client specialist law firm Withers who says he's seen a rise in those interested in expatriation lately. This number may increase in the wake of a crackdown on clients of UBS AG. The Wall Street Journal reports that lawyers representing UBS clients think that the bank will reveal names associated with 5,000 to 10,000 accounts.

Wealth Bulletin paints a dramatic picture in which the ultra-wealthy elude possible taxes by staying on their yachts and cruising outside coastal waters. Just how many of these yacht-borne rich renegades are there? It is estimated that there could be a few thousand of them keeping trillions of dollars away from global tax authorities. Those who decide to pay the U.S. exit tax would then become former U.S. citizens and would be able to travel to the U.S. without facing more taxes. Around 90 people gave up their citizenship in the first half of 2009 so lets not call this a mass exodus yet.

[Thanks, Ben!]