Giving Up a Green Card and Taxes: I-407, Exit Tax and the Final Year

Many people who lived in the US on a green card eventually move back home to Europe. The lease is ended, the car is sold, and the card ends up in a drawer. As far as the IRS is concerned, that often changes nothing. Until the green card has been formally given up, you are a US tax resident: you file a return on your worldwide income and report your accounts in Europe. This page explains when your tax obligation ends, what applies in the final year, who counts as a long-term resident under the exit tax rules, and what role the tax treaty plays. Related rules apply to US citizens who renounce their citizenship; you will find them under Exit Tax and Form 8854.

1As long as the green card is valid, you are a resident

US tax law gives foreigners two routes into full tax residency: the substantial presence test, based on days in the country, and the green card test. Under the green card test, you are a resident if at any time during the year you are a lawful permanent resident of the US. In the IRS's words, you generally have this status if you have been issued a Permanent Resident Card, and you keep it until it is rescinded or found to have been abandoned in an administrative or judicial proceeding.

So moving to Europe does not, on its own, end your status for tax purposes. If you hold a green card and live in Oslo, Stockholm or Dublin, the IRS treats you as a US tax resident, just like any US citizen abroad: a return on your worldwide income, a credit for European tax, FBAR and, where applicable, Form 8938. What that looks like day to day is covered in the guide US tax obligations for Americans living in Europe.

Taxes also feed back into immigration law. In Publication 519, the IRS points out that a green card holder who is required to file as a resident and fails to do so may be regarded under immigration law as having abandoned their status. So if you want to keep your green card, you cannot make yourself invisible to the tax authorities; and if you want to give it up, do not count on that happening by itself.

2How residency ends: Form I-407

Voluntarily giving up your status is a formal step. It is done with Form I-407, Record of Abandonment of Lawful Permanent Resident Status. According to Publication 519, your status is considered abandoned when you file Form I-407, or a letter stating your intent to abandon it, together with your green card with USCIS or a US consular officer.

USCIS describes the process like this: the form is mailed to the USCIS office in Lee's Summit, Missouri. In very rare cases, a USCIS international office or a US embassy or consulate will accept the form in person if immediate proof of abandonment is needed. You can also hand it to a CBP officer at a port of entry. For holders up to age 14, a parent or guardian signs. Only documents issued by USCIS should be submitted, not, for example, a driver's license or a Social Security card. The fee is listed in the USCIS fee schedule.

What matters for tax: USCIS passes your name and filing date to the IRS, as required by the tax code. And USCIS itself warns that ending your status can have significant tax consequences, up to and including the exit tax. So before you send the form, run the numbers in the sections that follow.

3The final year: one return in two parts

If you stop being a US tax resident during a year and do not become a resident again the following year, you are a dual-status alien for that year: a resident up to a cutoff date, a nonresident after it. The cutoff date is generally December 31. An earlier date is possible: for green card holders, it is the first day you are no longer a green card holder, provided your tax home was abroad for the rest of the year and you had a closer connection to that country than to the US. You establish this date with a signed statement that includes your passport details, taxpayer ID, your last day in the US and the facts showing your tax home and closer connection. If you are a resident again the following year, Publication 519 treats you as a resident until the end of the year.

For the year itself: for the resident part, you are taxed on your worldwide income; for the part after that, only on US-source income and income effectively connected with a US trade or business. A return for such a year comes with restrictions: no standard deduction, no joint return with your spouse unless you both elect to be treated as residents, and no head of household filing status.

After the final year, you only file a US return if you have US income, for example from a rented apartment in Florida or a stake in a US partnership, and then on Form 1040-NR. Whether the state you lived in still treats you as a resident is a separate question; it is covered under Your US state after you move away.

4Long-term resident: eight out of fifteen years

For most people who give up their green card after a few years, the matter ends with the final return. For one group, there is more: long-term residents. Under the statute, a long-term resident is anyone who is not a US citizen and was a lawful permanent resident of the US in at least 8 tax years within the 15 tax years ending with the year residency ends. A year does not count if, during it, you were treated as a resident of the other country under a tax treaty and did not waive the treaty benefits.

So if you have held a green card for ten years and spent the last two of them back in Europe, you are almost always a long-term resident, unless you claimed treaty benefits in those years. For you, ending the green card is an expatriation within the meaning of the statute, just like renouncing citizenship. The expatriation date is the earliest of the dates in the table; for voluntary abandonment, that is the day you file Form I-407.

Long-term residents file Form 8854 for the year of expatriation. It is attached to the return for that year and filed with it by the due date; if you do not have to file a return, you send it to the IRS by the date the return would have been due. If it is missing, incomplete or incorrect, the statute imposes a penalty of $10,000 for the year, unless there is reasonable cause.

5Covered expatriate and exit tax

Three tests decide whether expatriation costs you tax. You are a covered expatriate if any one of them applies:

• Your average annual US income tax for the five tax years before the expatriation date exceeded the threshold, which for an end in 2026 is $211,000.
• Your net worth on the expatriation date was $2 million or more.
• You do not certify on Form 8854 that you complied with all US tax obligations for the five preceding tax years.

The third test is the one many people underestimate. It catches even those who neither pay high taxes nor have significant wealth, if returns, FBARs or forms such as 8938 are missing for the last five years. The exceptions the statute provides for certain dual citizens from birth and for minors are, by their wording, tied to citizenship and do not help green card holders; in any case, they only exempt you from the first two tests, not from the certification. If you have years to catch up on, do it before you expatriate; the options are explained under Catching up on FBARs and penalties and Streamlined Procedure: catching up on US taxes without penalties, which is also open to green card holders.

If you are a covered expatriate, your assets are treated as sold at fair market value on the day before expatriation. The deemed gain is taxed to the extent it exceeds the exclusion amount: $890,000 for 2025, $910,000 for tax years from 2026. The statute offers long-term residents some relief: assets you already owned on the day you first became a US tax resident are treated, for this calculation, as acquired at no less than their fair market value on that day. So appreciation from before your time in America stays out of it, unless you waive this.

Some assets are not deemed sold but receive special treatment. Retirement benefits, including from foreign pension plans, are treated as deferred compensation; depending on the type, tax is withheld from later payments or the present value is taxed immediately. Accounts such as an IRA are treated as fully distributed on the day before. And if, as a covered expatriate, you later make a gift or bequest to a US citizen or US tax resident, it can trigger a separate tax for the recipient; more on this under Gifts and inheritances across the Atlantic.

6The treaty route

If you live in Europe with a green card, you are often a dual resident: of the US under the green card test, and of your European country under its own law. A tax treaty resolves this conflict with tie-breaker rules under which you are a resident of only one country for treaty purposes. If that turns out to be your European country, you can rely on it.

The treaty coordination regulation spells out what happens next. If you are a dual resident and claim residence in the other country to reduce your US tax, you are treated as a nonresident when your US income tax is calculated. You file Form 1040-NR and attach Form 8833. For other tax purposes you remain a resident, for example when deciding whether a foreign company is a Controlled Foreign Corporation. The regulation itself points out that filing this way can affect whether immigration authorities decide your status has been kept.

For long-term residents, this route has a special effect. If you start being treated as a resident of the other country, do not waive the treaty benefits and notify the IRS, that is, according to the instructions for Form 8854, one of the dates on which your long-term residency ends. The IRS states explicitly in Publication 519 that this can trigger the exit tax rules. So the treaty route is not a quiet alternative to Form I-407: it can have exactly the same consequences. How tax treaties determine residence is explained under US tax treaties and residence.

7The order that works

• Count the years. In how many of the last 15 tax years did you hold a green card, and in which of them did you claim treaty benefits? Under eight years, the exit tax is not an issue.
• Run the three tests. Your average US income tax over the last five years, your net worth on the planned date, and whether everything has been filed for the last five years.
• Close the gaps. Missing returns, FBARs and information reports are filed before your expatriation date, not after.
• Choose the date. The day you file Form I-407 determines your final year, the thresholds for the tests and the exclusion amount.
• File the final year. A dual-status return, proof of the cutoff date and, if you are a long-term resident, Form 8854.

If you are not sure you really want to give up your green card, keep filing your US returns. Going invisible to the tax authorities does not reliably end your status, but it can put it at risk, and the years without returns will count against you later in the third test.

In short

• Until your green card is revoked or its abandonment is formally established, you are fully taxable in the US, even if you have long been living in Europe.
• You end your status voluntarily with Form I-407; USCIS reports your name and filing date to the IRS.
• In your final year you usually file a dual-status return: as a resident up to the end date and as a nonresident afterwards.
• If you held a green card in at least 8 of the last 15 tax years, you are a long-term resident, and the exit tax rules apply to you, with Form 8854.
• You are a covered expatriate if you meet any one of the three tests; your assets are then treated as sold on the day before, with an exclusion of $910,000 for 2026.

How we help you

• US taxes for US citizens abroadForm 1040, FBAR and Streamlined for US citizens living in Europe.
• US Tax ConsultationYour US tax question, answered by people who know both sides.
• Streamlined FilingCatch up on missed US tax returns and FBARs through the Streamlined procedure.