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A growing number of American expats are considering renouncing their U.S. citizenship for tax reasons – but it’s not as simple as it sounds.

The United States is one of only two countries in the world that requires its citizens to pay income tax based on their citizenship rather than their place of residence.

Consequently, life for American expats comes with certain cumbersome obligations, such as filing tax returns in two countries, navigating strict reporting requirements, and encountering potential roadblocks from European banks wary of U.S. clients.

For some, especially those who are settled abroad long-term, it feels easier to renounce their citizenship than to deal with the lifelong tax burden.

Renunciation is a big decision, but it's often misunderstood. Many assume it's a simple way to cut ties with the IRS, but the reality is more complex and can affect you in ways you may not have considered.

There's more to renunciation than filling out a few forms. It's a formal, legal act that must be done in person at a U.S. consulate by signing an Oath of Renunciation. It can only be performed outside of the U.S.

It can be costly too, carrying a price tag of $2,350 (€2,002). Citizenship ends when the Department of State approves and issues the Certificate of Loss of Nationality (CLN), but that's not the end of the journey. You can read more about the renunciation process here.

Prefer to speak to a tax expert in person? The team at 1040 Abroad are ready to answer all your questions

The first outcome is the goal: you’re no longer a U.S. citizen.