This amount is indexed for inflation annually and will probably be increased in future years.
The other test is based on your net worth on the day immediately before your expatriation date. If your net worth is at least US$2 million on that date you are a covered expatriate. That amount is not indexed for inflation.
If you don’t meet either monetary test and you make the required certification, you are not a covered expatriate and you are not subject to the exit tax. If you are a covered expatriate, the next step is to calculate the amount of your exit tax.
Certain assets are excluded when you determine your net gain subject to the exit tax. These include your interests in non-grantor trusts and in eligible deferred compensation items such as qualified pension plans, profit sharing plans or qualified annuity plans. An alternative tax system applies to these properties. You will be required to send the payers of these items IRS Form W-8CE (Notice of Expatriation and Waiver of Treaty Benefits). The trustees or other payers must withhold 30% US income tax on any amounts they subsequently pay you that would have been taxable had you remained a US citizen or resident. You cannot reduce this tax under any tax treaty.
US real estate is covered by the exit tax. After you expatriate, each US real property interest will be covered by FIRPTA (the Foreign Investment in Real Property Tax Act), but its basis will be adjusted by the amount of gain to which the asset has been subjected to the exit tax.
If you have an IRA (individual retirement account) or some other specified tax-deferred account you will be treated as receiving your entire interest in that account on the day preceding your expatriation date. You must pay tax thereon, but you will not be subject to a penalty for early withdrawal.
With respect to all of your other worldwide assets, you must determine the fair market value and the adjusted cost basis of each asset. Each of these assets must be marked-to-market as though you had sold it the day before your expatriation date.
Gains and allowable losses are taken into account. Tax is imposed on your net gain exceeding US$680,000 if you expatriate in 2014. The federal tax rate on long-term capital gains (those on most assets held more than a year) may now be as high as 23.8%. Most state and local governments impose additional taxes. One observation: many US taxpayers who sustained large capital losses during 2008 still have large capital loss carryovers and these can be taken into account in calculating their exit tax
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