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Exit tax · asset treatment

U.S. exit tax: mark-to-market and special assets

By Danilson Ramos · Founder, Atamatax

Direct answer

IRC §877A generally treats most property of a covered expatriate as sold for fair market value on the day before expatriation. For 2026, net gain otherwise included is reduced, but not below zero, by $910,000. Eligible and ineligible deferred compensation, specified tax-deferred accounts, and nongrantor trusts follow separate rules instead of the general deemed-sale calculation.

What to know

  • The 2026 mark-to-market exclusion is $910,000.
  • The exclusion reduces aggregate net gain; it is not a per-asset exemption.
  • Deferred compensation, specified tax-deferred accounts, and nongrantor trusts have special regimes.
  • The exit-tax amount itself is computed with a professional from the Form 8854 worksheets.

The general deemed sale

Property within the general rule is valued as though sold on the day before expatriation. Basis, fair market value, loss limitations, ownership, and exceptions must be established asset by asset. A net-worth estimate is not enough to compute the tax.

Assets outside the general rule

  • • Eligible deferred compensation can involve withholding and a treaty-benefit waiver with Form W-8CE timing.
  • • Ineligible deferred compensation can be treated as distributed at present value.
  • • Specified tax-deferred accounts can be treated as distributed immediately before expatriation.
  • • Nongrantor trust interests are subject to a separate withholding regime unless a permitted election and ruling apply.

Why pensions need classification

A foreign pension label does not decide its U.S. classification. Plan terms, treaty provisions, account rights, and the payor can change the analysis, so the readiness check routes pensions and deferred arrangements for review.

Free pre-renunciation assessment

See what to resolve before you set a date.

Five-year compliance, Form 8854, covered-expatriate indicators and the assets with their own rules — in ranges, with the order to fix things in. The exit-tax figure and the citizenship step follow with a professional and the Department of State.

Start the pre-renunciation check

Ready to build the case? Open a secure readiness case.

Questions

Can I subtract $910,000 from net worth?

No. The 2026 amount reduces net gain otherwise included under the mark-to-market rule, not net worth.

Does every asset use mark-to-market?

No. IRC §877A provides special rules for several categories.

Primary sources

Rules checked September 7, 2026. Use the form and instructions for the actual expatriation year.