More than two years after the State Department proposed lowering the fee to renounce US citizenship, a reduction has finally come into affect as of 13th April 2026.

What is the fee to renounce US citizenship in New Zealand?

From 13th April 2026, the fee to renounce US citizenship has dropped from $2,350 USD to $450 USD.

The fee was originally increased to $2,350 USD in 2014, and at the time, resulted in a flurry of applications to renounce US citizenship prior to the fee increase.

Why has the fee to renounce US citizenship been reduced?

The specific reason given was that the reduction is intended to “alleviate the cost burden” of individuals who renounce their U.S. citizenship.

However, this fee reduction has come after intense criticism, along with litigation from US citizens overseas who, in many cases, have no connection to the US and have become subject to the FATCA legislation discussed in our prior article.

Many are now familiar with the term “accidental Americans”, which covers a broad group of individuals who may have legally hold US citizenship, but may have never been to the US nor have any association with the USA.

As is discussed throughout the articles on our website, all US citizens are considered to be tax residents of the USA, regardless of their ties beyond citizenship. This compliance burden, combined with the fee of $2350 USD to renounce US citizenship, led to significant pressure from lobby groups to reduce the fee back to its original cost.

Do US Citizens Considering Renouncing US Citizenship still need to file US tax returns?

Yes, it is important to note that whilst the fee reduction can certainly be considered a win for US citizens worldwide, who intend to renounce, US tax compliance is still a requirement as part of the process.

The US does impose an “exit tax” on those who renounce, that are considered “covered expatriates”.

Generally speaking, a covered expatriate is an individual with:

-          A net worth of greater than $2m USD as of the day prior to renouncing

-          An average annual US tax liability of $211,000 for the 5 years prior to renouncing

-          Or an individual who has not certified on Form 8854 that at least 5 years of tax returns have been filed prior to renouncing

As we can see above, a US citizen who renounces citizenship must ordinarily file at least 5 years of tax returns prior to renouncing citizenship. Without doing this, an individual is placed automatically into the “covered expatriate” category of individuals, whom are considered to have renounced for tax purposes.

There are amnesty programs available, which provide some exceptions to the rules above.

Summary

For those who are considering renouncing US citizenship, fortunately the process has just become significantly less costly.

However, the process can be fraught with complications, and it is important to obtain expert US tax advice, along with legal advice.

Here at the US Tax Team, we offer US tax advice through consulting, to help clients through this process. Reach out to us at info@usatax.nz