Renouncing U.S. citizenship or a green card is a major decision that comes with financial consequences, particularly regarding Social Security benefits and taxation. Many expatriates assume they can still receive their benefits abroad with minimal tax burdens, but U.S. laws impose harsh penalties and withholding taxes on former citizens and long-term green card holders.

Understanding how Social Security benefits are taxed after renouncing citizenship or a green card is crucial for those considering expatriation. Here’s a breakdown of what you need to know before making this life-changing decision.

Can You Still Receive Social Security After Renouncing Citizenship?

Yes, in most cases, renouncing U.S. citizenship or surrendering a green card does not eliminate your right to Social Security benefits—as long as you meet the eligibility criteria:

1. You must have earned at least 40 work credits (typically 10 years of work in the U.S.).
2. You must be at least 62 years old to start collecting retirement benefits.
3. You must reside in an eligible country—some nations have restrictions that prevent Social Security payments.

While you may still qualify for benefits, the taxation rules change significantly, making it more expensive to receive Social Security while living abroad.

How Social Security Taxes Work for Former U.S. Citizens

If you give up U.S. citizenship or your green card, the IRS applies a 30% tax on Social Security benefits before they are sent to you—this is known as nonresident alien withholding tax.

Key Tax Implications:

• 30% tax withholding applies to 85% of your Social Security benefits.
• This means an effective tax rate of 25.5% on your total monthly benefit.
• You cannot claim tax deductions or credits that would normally lower your tax burden as a U.S. citizen.

For example, if your monthly Social Security check is $2,000, the U.S. government will withhold $510 in taxes, leaving you with only $1,490 per month.

Exceptions: Tax Treaties with Certain Countries

Some countries have tax treaties with the U.S. that reduce or eliminate the 30% withholding tax on Social Security benefits. These agreements vary by country, but typically benefit residents of:

• Canada
• United Kingdom
• Germany
• France
• South Korea
• Italy

If you move to one of these countries, you may pay little to no tax on your Social Security benefits. However, moving to a country without a tax treaty means you’ll face the full 30% withholding tax.

What About the Exit Tax?

For wealthier expatriates, giving up U.S. citizenship or a long-term green card could trigger an exit tax under the Internal Revenue Code Section 877A.

The exit tax applies if:

1. Your net worth exceeds $2 million, OR
2. Your average annual U.S. tax liability over the past five years exceeds $190,000 (as of 2024), OR
3. You fail to certify tax compliance for the past five years.

This means your assets, including retirement accounts, may be subject to capital gains taxes as if they were sold the day before renouncing citizenship. This can result in a significant tax bill upfront before you even leave the U.S.

How Green Card Holders Are Affected

Long-term green card holders (lawful permanent residents) face similar tax consequences when surrendering their green cards, particularly if they have had their status for at least 8 out of the last 15 years.

• If you meet the exit tax criteria, you will owe taxes on worldwide income and unrealized capital gains.
• Even after surrendering a green card, you may still be considered a U.S. tax resident unless you file the proper paperwork.
• The 30% tax on Social Security benefits applies just as it does to former citizens.

How to Minimize Social Security Taxation as an Expat

If you’re planning to renounce your U.S. citizenship or green card, consider these strategies to reduce tax burdens on Social Security benefits:

1. Move to a country with a U.S. tax treaty – If your new country has an agreement with the U.S., you may avoid the 30% withholding tax.
2. Withdraw benefits strategically – Consider delaying Social Security until you move to a treaty country or have a lower tax rate.
3. Use tax planning strategies before expatriation – Consult a tax professional to manage your assets and minimize exit tax liabilities.
4. Consider keeping legal U.S. ties – Maintaining a small U.S. presence (such as part-time residence) may allow for more favorable tax treatment.

Final Thoughts

Renouncing U.S. citizenship or surrendering a green card can be financially beneficial in some cases, but the impact on Social Security benefits and taxation must be carefully considered.

• The U.S. applies a 30% tax on Social Security benefits for nonresidents.
• Tax treaties may lower or eliminate this tax, but only in select countries.
• The exit tax could create a huge upfront tax burden, particularly for wealthier individuals.

Before making any decisions, consult with a tax professional and financial advisor to ensure you fully understand the long-term implications on your retirement and Social Security benefits.

For official Social Security taxation guidelines, visit the Social Security Administration’s website at www.ssa.gov.

Disclaimer – Our team has carefully fact-checked this article to make sure it’s accurate and free from any misinformation. We’re dedicated to keeping our content honest and reliable for our readers.