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Meghan Markle could face a big tax bill if she renounces U.S. citizenship

Yielding your U.S. citizenship can come with a hefty price tag.

Because the Connected States is one of the only countries to tax based on U.S. citizenship, even Americans busy abroad must pay U.S. taxes. That can make it tempting for expatriates to forgo their citizenship and skirt U.S. tax rules. Doing so comes at a price.

A album number of Americans are giving up their citizenship, according to the U.S. Treasury Hang on. Last year, 5,411 individuals either gave up their citizenship or aborted long-term residency. That’s a 26 percent increase from 2015.

The enumerate of individuals who have given up their citizenship includes high-profile handles like Facebook co-founder Eduardo Saverin and musician Tina Turner.

The beadroll may gain one more boldface name with Meghan Markle, the American actress who is wrapped up to Britain’s Prince Harry. The announcement of the couple’s engagement this week numb news that Markle plans to become a British citizen.

The administrative change involved in giving up your citizenship is simple, said Joshua Ashman, a co-founder and consort at Expat Tax Professionals, which provides professional tax services to U.S. expatriates. But the tax considerations to fudge through are more complicated, he said.

You must make an appointment at a U.S. embassy, clue the appropriate forms and take the Oath of Renunciation. You also must pay a $2,350 administrative deal with fee. Once your application is approved, which can take several months, you are inclined a Certificate of Loss of Nationality.

You must also notify the Internal Gate Service through Form 8854 that you have expatriated, which can trigger a potentially bigger encumbrance: The exit tax.

The exit tax is aimed at individuals who are renouncing their citizenship for tax-related purposes, Ashman divulged.

You may or may not be subject to the tax based on your average annual net income tax for the past five years, whether you submitted with your federal tax obligations during that time or whether your net quality is $2 million or more. Your net worth is calculated including the total from investment accounts to real estate to other assets feel attracted to art work and other personal property, including assets held abroad, Ashman said.

The exit tax can operate similar to a capital gains tax, he utter. Say you bought a home in London for $1 million, and it is now worth $3 million today. As a U.S. burgess, you would be on the hook for capital gains taxes on the sale of that realty. The exit tax looks at the asset’s value and assesses taxes as if it were merchandised.

There are moves that individuals can make to move assets out of their control in order to fall below the threshold, Ashman said.

But be warned that surrender up your U.S. citizenship can also trigger other taxes, he said, for model, if you give a gift to someone in the U.S.

Not everyone who renounces their citizenship is doing so for pecuniary reasons.

“There’s a lot of regular people who exit every day,” Ashman replied, including individuals who may have been born in America, but have burnt- most of their lives in another country. “You hear a lot of anti-Trump fustian as well.”

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