“What is an Expat?” If you’re asking that question or thinking of leaving the U.S. to live abroad, you’ve come to the right place. The word, “expatriate” is a nuanced word with many meanings. But in general, it means that someone is living in a country that is not the one they were brought up in. When expats take up residency in a new country, their stay is usually long-term or permanent.

The word derives from the Latin prefix, ex, as in “out of,” and Patria, the Latin word for “country.” Merriam Webster defines the word “expatriate” as follows: 1. Banish, exile, 2. to withdraw (oneself) from residence in or allegiance to one’s native country. 3. to leave one’s native country to live elsewhere; also: to renounce allegiance to one’s native country.”

The question, “what is an expat” often brings young adventurers and well-heeled retirees to mind. Many people choose to live abroad so they have a chance to immerse themselves in a different culture. But the word also applies to people who work abroad, disaffected citizens, and those — like NSA whistleblower Edward Snowden (U.S.) and Wikileaks’ Julian Assange — who’ve taken shelter after committing crimes in their home countries. And where these new residents go, expatriate communities often spring up for friendship and mutual support. Members of these communities have regular get-togethers and sometimes live in gated communities or in local neighborhoods and meet regularly.

Some people also choose expatriation, and permanently, relinquish their citizenship in the country of their birth. Others decide to live abroad and keep their citizenship. There are many ways to be an ExPat, singles, couples, even families with children choose to reside outside their home country, including US citizens.

“Expatriate” and “Expatriation”: What’s the Difference?

And what’s the difference between the terms “expatriate” and “expatriation”? Expats often live in other countries for long periods of time without relinquishing their citizenship. Expatriation, on the other hand, is the process of relinquishing their citizenship for the country of their birth and becoming a citizen or subject of another country, according to The Law Dictionary.

A 2016 report by the Internal Revenue Service (IRS), notes record numbers of U.S. citizens are choosing the permanent solution of expatriation, as described by U.S. News and World Report.

As a bureau of the U.S. Treasury Department, the IRS publishes a quarterly list of the names of people who have chosen to do this. Before 2011, fewer than 1,000 Americans chose to expatriate each year. However, in the last quarter of 2016, more than 2,300 people became expats. At least 4,279 people did this, but this year’s expatriate numbers have already exceeded this, with more than 5,411 individuals departing for new lands.

Why Are More People Living As ExPats Abroad?

Because the IRS publishes this list of ExPats, it appears that at least more than a few people leave due to U.S. tax policies. And it’s not necessarily about saving money. Some Americans who’ve been living abroad for years, and who often have dual citizenship, say the paperwork’s a major hassle. The U.S. and a small number of countries tax people based on their nationality instead of their residency. This means many Americans living abroad face double taxation, U.S. News reports.

“The escalation of offshore penalties over the last 20 years is likely contributing to the increased incidence of expatriation,” noted the tax attorneys at Andrew Mitchel LLC on their International Tax Blog.

According to Forbes, the 2010 Foreign Account Tax Compliance Actwas designed to crack down on tax evasion but has also made the paperwork even more of a hassle.

The attorneys also noted that the list referring to 2016’s final quarter covers President Donald Trump’s election, and almost twice as many Americans chose to expatriate in 2016 as in the same quarter in 2015.  In context is makes sense, as even some notable personalities, including Supreme Court Justice Ruth Bader Ginsburg and actor Bryan Cranston said, perhaps jokingly, said that they would leave the U.S. if Trump was elected. With the sudden spike in “expatriots,” it could indicate that the 2016 election may have had some effect.

Planning to Renounce Your US Citizenship? It’s Harder Than You Think

There are five steps you need to take in order to do so, Expat Info Desk reports: You’ll need a second passport in order to renounce your U.S. passport. While repatriation is certainly within your rights, the U.S. State Department doesn’t allow you to do this if you don’t have a second passport. Expat Info recommends that you do NOT purchase a passport from the internet. Make sure the passport you do receive is issued by the government of the country you are moving to.

  • Book your renunciation appointment. If it’s possible, you should book your appointment at an embassy or consulate within the country where you plan to live after you’ve renounced your passport. If needed, you can book your appointment at other embassies or consulates, and you may even want to “appointment shop” because wait times can fluctuate greatly from one location to another. If you’re not the only person renouncing your citizenship, be certain to make that clear when you book the appointment. And if you don’t want to book the appointment yourself, you can have an expat lawyer do this for you. Keep in mind, however, that this may delay the process because some places require written proof that your lawyer represents you. They will request this via the G-28 form.
  • Attending your renunciation appointment. Along with your passports, you’ll need to bring your birth certificate and, should you have one, a certificate of naturalization from the country of your second passport. There are often long lines at embassies. If that’s the case, let someone know you have an appointment. Don’t be surprised if you’re asked to fill out numerous copies of each form. Keep them in organized stacks and ensure that you read everything that you and the embassy official have written down. Also make sure the signatures are written in the correct places. You’ll be presented with the DS-4083 at the end of your appointment. Keep this in a safe place because it’s the only physical evidence you have that you’ve completed the process of renouncing your U.S. citizenship. This document is signed and affixed with a seal. This document can take months to process because it must be approved by the U.S. State Department, so it’s a good idea to keep it safe and close at hand.
  • Lastly, you’ll need to file your final U.S. Tax Return. This tax return will extend from January 1 through the day you expatriate. The fair market value of your assets is listed up to the day before that. This is because on the day you renounce your citizenship, the IRS no longer considers you to be a taxable person. If you renounce on any day other than December 31, you’ll need to file a 1040 form and possibly a 1040NR. You’ll also need to file IRS Form 8854, the Expatriation Statement. It’s the exit tax form, and it’s filed along with your final U.S. Tax Return. The IRS has additional instructions here.

There are other financial concerns when it comes to renouncing your citizenship. The U.S. faced a maelstrom of criticism when it hiked renunciation fees by 422 percent, from $450 to $2,350. The State Department cited increased demand and paperwork as its reasons for raising this fee, according to Forbes. This huge fee is actually 20 times higher than the average level in other high-income countries.

That would mean, that the best day to renounce your citizenship would be on December 31st, not only as a symbolic “New Year, New Start” but to make close out your year cleanly, with no “half tax years” in either country, if their dates match up.

But here’s where things get a bit arbitrary: The convoluted fees for renouncing your citizenship:

Not only do expatriates have to pay a renunciation fee, they also have to pay a relinquishment fee as well. And (surprise!) the State Department raised that fee from $450 to $2,350. The agency claims it did this as a matter of convenience. Obviously, this is for their convenience, and not your or any other expat.

You should also take a bit of time reflecting on any other potential consequences you face when you relinquish citizenship.

Investopedia notes:

“Renunciation has significant consequences. Aside from giving up the benefits granted to U.S. citizens, the U.S. Department of State advises that anyone considering renunciation of their U.S. citizenship should understand that, in almost all cases, the act is irrevocable. An exception: A person who renounces his or her citizenship before the age of 18 can have that citizenship reinstated by notifying the Department of State within six months of turning age 18.”

This means that children of parents who have chosen to live abroad can revert to US Citizenship when they become adults – so families with children have not taken that choice from them.

A Serious, Weighty Decision, but Few Have Regrets About Making It

But many people have found plenty to love about becoming an expat. Department of Wandering interviewed numerous expats from the U.S. and other countries, and all were pretty happy with their experiences.

Anna G of The Fearless Flashpacker moved from the U.S. to Bahrain for her job and decided to become an expatriate. Here’s what she had to say:

“Unlike transient visitors, you have a chance to absorb the culture, history, cuisine, and language of your second country. But above all, you make a family of friends, locals and fellow-expats alike. The further you are from home, the less pronounced differences become.”

Trish, another U.S. citizen, decided to move to Germany because she realized there were many job opportunities in the country, thanks to her profession. So she began applying for jobs and moved to Germany in January 2011. The fact that there were increased opportunities for travel also attracted her to the country.

Passports

For her, this is the best reason for becoming an expat:

“If I have to choose just one thing, it’s the travel opportunities. Living in Germany, I can easily drive or take the train to the Netherlands, Belgium, Luxembourg, France, Switzerland, Austria, Liechtenstein and the Czech Republic for weekend trips or even day trips. Not to mention Germany itself has countless amazing things to see and do. I still have not run out of things to do within a two-hour drive of my town. I also live very close to Frankfurt airport so air travel is easy as well. My goal is to visit every country in Europe!”

Becoming an expatriate opens your eyes to new experiences. Depending on your interests, it can open you up to new cultures, to astonishing natural beauty, to different cuisines, and different ways of thinking. It can be a life-changing and truly amazing experience.

It’s something well worth the preparation.

Featured image via The Preiser Project, Flikr CC2.0

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