Form 8854 is the Initial and Annual Expatriation Statement. You file it when you give up US citizenship or end long-term US residency, to certify that you've met your federal tax obligations for the 5 years before you left and to report what the expatriation rules require. Filing it also decides whether you're treated as a covered expatriate and hit by the exit tax.
Everything below comes from the IRS Instructions for Form 8854 (2025), the form itself and the IRS expatriation tax page, as of October 2026.
Who has to file
- You file the initial Form 8854 (Parts I and II) for the year you relinquished US citizenship or, as a long-term resident, ended your residency.
- You file an annual Form 8854 (Parts I and III) in later years if you deferred tax on any property, reported an eligible deferred compensation item, or reported an interest in a nongrantor trust on an earlier Form 8854.
A long-term resident is someone who was a lawful permanent resident, a green card holder, in at least 8 of the last 15 tax years ending with the year residency ended. Long-term residents end residency on the earliest of dates such as filing Form I-407 to abandon status, a final order of abandonment or removal, or starting to be treated as a resident of a treaty country, which also needs Form 8833.
The three covered expatriate tests
If you expatriated after June 16, 2008, you're a covered expatriate if any one of these applies:
| Test | Threshold (2025) |
|---|---|
| Average annual net income tax liability for the 5 tax years before expatriation | More than $206,000 |
| Net worth on the date of expatriation | $2 million or more |
| Tax compliance certification | You fail to certify on Form 8854 that you met all federal tax obligations for the 5 prior tax years |
The third test is the one people underestimate. Even someone well under both of the first two tests becomes a covered expatriate by not filing Form 8854, or by filing it without the certification. The figures above are from the 2025 instructions, as of October 2026.
Your expatriation date
Everything on the form runs from one date, so it helps to know which one applies. The IRS treats a citizen as relinquishing citizenship on the earliest of four dates:
- The date you renounce US nationality before a US diplomatic or consular officer, if the State Department later approves it with a certificate of loss of nationality.
- The date you give the State Department a signed statement of voluntary relinquishment confirming an expatriating act, again if a certificate of loss of nationality follows.
- The date the State Department issues the certificate of loss of nationality.
- The date a US court cancels a naturalized citizen's certificate of naturalization.
Net worth is measured on that date. The 2025 instructions include an example of someone whose net worth fell below $2 million on her expatriation date after a gift she reported on a gift tax return, which is why the timing of large gifts before leaving deserves attention.
Two exceptions for dual citizens and minors
- Dual citizens from birth: you became a US citizen and a citizen of another country at birth, you're still a citizen of and taxed as a resident of that country, and you were a US resident for no more than 10 years in the 15-year period ending with the year you expatriated.
- Certain minors: you expatriated before age 18 and a half, and were a US resident for no more than 10 tax years before expatriating.
Both exceptions only apply to the first two tests. You still have to file Form 8854 and certify compliance.
What the exit tax does
A covered expatriate is taxed as if most property had been sold at fair market value on the day before the expatriation date, the IRS's mark-to-market tax. For 2025, the net gain you'd otherwise include is reduced by $890,000, the exclusion amount. Deferred compensation, specified tax-deferred accounts and nongrantor trust interests follow their own rules instead, and you can make an irrevocable election, property by property, to defer paying the tax, with interest charged and security required.
When and where to file
- Attach the initial Form 8854 to your income tax return for the year that includes your expatriation date, such as Form 1040-NR, and file by that return's due date.
- If you don't have to file a return, send Form 8854 to the IRS by the date the return would have been due, including extensions.
- Send the original to Internal Revenue Service, 3651 S IH35, MS 4301 AUSC, Austin, TX 78741.
- For each later year an annual form is required, attach it to that year's return and send a copy marked Copy to the same address.
Other forms that can still apply
The instructions note that if you were a US person for any part of 2025, you may also need to file FinCEN Form 114, the FBAR, and Form 8938 for specified foreign financial assets. If you held foreign accounts while still a citizen, those reports belong with your final years of returns, and the 5-year certification only works if they're in order too. People who are still filing Form W-8BEN with US payers after leaving will usually need to update it once their status changes.
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The penalty for not filing
If you're subject to section 877A and fail to file, leave out required information or include incorrect information, the instructions set a penalty of $10,000 for that year, unless the failure was due to reasonable cause and not willful neglect. That's on top of becoming a covered expatriate through the certification test.
The verdict
Form 8854 is the form that decides how expensive leaving the US tax system is. Check the $206,000 and $2 million tests early, get the 5 prior years of returns in order before your expatriation date, and file the form on time even if you're sure you're under both thresholds. Skipping it would be the one way to fail a test you'd otherwise pass.
Frequently asked questions
Who needs to file Form 8854?
Former US citizens and long-term residents file it for the year they expatriate, and in later years if they deferred tax, have eligible deferred compensation or an interest in a nongrantor trust reported on an earlier form.
What makes someone a covered expatriate?
Any one of: average annual net income tax liability for the 5 prior years above $206,000, net worth of $2 million or more, or failing to certify 5 years of federal tax compliance on Form 8854.
What is the Form 8854 exclusion amount for 2025?
The net gain a covered expatriate must include under the mark-to-market rules is reduced by $890,000 for 2025.
What is the penalty for not filing Form 8854?
The instructions set a penalty of $10,000 for that year unless the failure was due to reasonable cause and not willful neglect.
Who counts as a long-term resident for Form 8854?
A lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year residency ended.
