Category Archives: citizenship taxation

Part 2: Inheriting From America AKA Anxiety On Steroids – Retain Or Renounce U.S. Citizenship? What About U.S. Tax Compliance?

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Prologue

This is the Part 2 of two posts motivated by the story of a Canada/U.S. dual citizen living in Canada who sought help from the University of Washington “Low Income Tax Clinic” – “LITC”. The first post is here.

Part 1: The University Of Washington “Low Income Tax Clinic” And A Canadian Student

This was also discussed by “Tax Fairness Abroad“.

It’s worth reading the entire blog post from Tax Fairness Abroad titled “A summer job and bad advice land an American in Canada in international tax court“.

The post references a report from the University of Washington “Low Income Tax Clinic”. (Note that the “LITC” also provided assistance to Gabriel Morrow who is another American abroad who received advice from the clinic.)

The complete text of the “LITC” report AKA the drama of taxing Americans abroad

“Taxpayer is a dual US-Canada citizen; TP is a long-term resident of Canada and is employed there. TP’s father passed away in 2020 and client received an inherited retirement account in 2021 (approximately $110K). TP was misinformed by the retirement account custodian that the “taxes have been paid” (when,in reality, this was just the tax withholding from the transaction). TP believed that taxes had been reported and paid; the retirement account was not included in the 2021 tax return. TP also did not include 1099-income earned while doing a summer job in Canada for a U.S. domiciled company. TP received a notice of deficiency, and a tax court petition was filed. Unfortunately, the TP has a deficiency because the retirement account; nonetheless, IRS appeals refused to apply the LITC’s treaty claim in regard to the 1099 income and is invoking the US-Canada Treaty savings clause. The LITC will be requesting a competent authority determination on this issue (Revenue Procedure 2015-40, Section 6.04(3) and related IRM provisions). However, the TP will still have a liability because of the retirement account taxable income—this liability process will continue through appeals while the competent authority determination is submitted and a determination is received from the IRS.”

000001

What facts can we glean from the report?

It appears that this dual Canada/U.S. citizen who resides in Canada filed a U.S. tax return for the 2021 year. That return omitted both distributions from the U.S. IRA AND income from the summer emmployment performed in Canada. It is likely that the IRS was able to match his Social Security Number with the information returns that had been filed for both the IRA distributions and the wages from the U.S. based employer. Put another way: the existence of the information returns combined with the Social Security Number on the U.S. tax return, alerted the IRS to the two specific income sources that should have been included on the tax return.

Question: What does this imply for Americans abroad who stand to inherit retirement plans or other income generating assets (for example a stock portfolio) from a U.S. relative? This is a recurring question. What about long term Americans abroad who may not be current on their U.S. tax returns? Should those people renounce U.S. citizenship prior to inheriting these assets? Should they remain American? If so, how do they manage U.S. tax compliance? Inheriting assets of a kind that would generate income and require the reporting of that U.S. source income implicates the question of U.S. tax compliance.

Two background points that are worthy of note:

1. The United States does NOT impose tax on the value of an inheritance. Rather it taxes the income generated from that inheritance. As per 102 of the Internal Revenue Code:

Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.

(Note that your country of residence may impose an inheritance tax.)

2. In most states, depending on the circumstances, it is possible to “disclaim” an inheritance. As always, the Internal Revenue Code – section 2518 – imposes specific procedural requirements. If you want to completely avoid these issues (perhaps because the amount of the inheritance is very small) you should be aware that a disclaimer is possible. That said, to disclaim an inheritance – although there may be good reasons to disclaim an inheritiance – is an erosion of your wealth.

The inheritance from America – The Good, The Bad And The Ugly

Inheritances (and gifts) can be income producing or non-income producing. It seems likely that inheritances that are non-income producing will not produce income tax (and therefore tax filing) consequences. For example, if a U.S. citizen were to receive personal property that would not be used to generate income there would be no presumptive income issues. The problem is more likely to arise where the American abroad receives assets that are (1) income producing and (2) reported as income producing. An obvious example of an income producing inheritance would be an IRA.

This purpose of this post is to discuss the quesion of “income producing inheritances” from various perspectives. The “LITC” case of the Canadian student reinforces why “information returns matter. The effect of the information return (reporting the fact of the inheritance of the IRA and the fact of the employment) is that the IRS would have a reason to expect income to be reported on a U.S. tax return.

If you are a U.S. citizen living outside the United States you should consider the implications of receiving any inheritance, but most particulary an inheritance from the United States. I suggest that the implications should be considered from the following perspectives in Category A, Category B and Category C.

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Taxation Makes U.S. Citizenship A Caste System With Or Without Birthright Citizenship

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John Richardson – July 4, 2026

On June 30, 2026 the Supreme Court Of The United States released it’s decision in Trump v. Barbara. The complete decision can be read here:

https://www.supremecourt.gov/opinions/25pdf/25-365_4hdj.pdf

A June 30, 2026 discussion (with initial impressions) is found in the Appendix to this post.

It starts with the 14th Amendment

The 14th Amendment of the U.S. constitution starts with the following language:

Section 1

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.

The decision should be interpreted in a very minimal way as follows:

– Five justices (Roberts, Sotomayor, Kagan, Jackson and Barrett) interpreted the 14th Amendment (the words “and subject to the jurisdiction” notwithstanding) to mean that birth on U.S. soil is a sufficient condition for U.S. citizenship (the number of dissenting decisions means that there is a good chance that this issue will be revisited)

– Four justices (Thomas, Alito, Gorsuch and Kavanaugh) ruled that the 14th Amendment should NOT be interpreted to mean that birth on U.S. soil was a sufficient condition for U.S. citizenship

– Justice Alito in particular was very skeptical of those who were born in the USA but were also born as citizens of another country. Justice Alito begins his dissent with:

JUSTICE ALITO, dissenting.

This is one of the most important decisions in the history of the Court, and in my judgment, the Court has made a serious mistake. As interpreted by the Court today, the Fourteenth Amendment confers citizenship on virtually everyone who happens to be born in this country, including the children of “birth tourists,” women who come here solely for the purpose of giving birth to a child and then promptly return home. Careful analysis of the text of the Fourteenth Amendment and the process that led to its adoption shows that it does not degrade the concept of United States citizenship in this way. Instead, the Fourteenth Amendment confers citizenship on only those children who, at birth, owe allegiance solely to this country.

It is the inclusion of the words “owe allegiance solely to this country” with particular emphasis on the word “solely” that indicates the hostility toward “dual citizenship” at birth.

Yet, it is the combination of “birth on U.S. soil” coupled with being born as a citizen of another country that creates the most valuable form of U.S. citizenship!

America is taxation and taxation is America!

Yes, it’s the Internal Revenue Code that makes dual citizenship from birth so valuable. Under 877A(g)(1)(B)(i) an exemption to the Exit Tax rules is created for certain individuals who were born dual citizens. The specific text of the Internal Revenue Code which creates preferential treatment for dual citizens at birth is:

(i)the individual—

(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs,

Those interested in a “deeper dive” might find this earlier post from this Citizenship Solutions blog interesting.

The narrow purpose of this post is to demonstrate that those who were born on U.S. soil as dual citizens from birth have a much higher standard of U.S. citizenship than those who were NOT born as dual citizens from birth. This is a shocking realization for a country that claims to have equality of citizenship. Because of the tax code, nothing could be further from the truth! The Internal Revenue Code generally (through complexity and exemptions) divides and conquers U.S. citizens. The United States is the only major country in the world that requires its citizens, who do NOT live in the country, to pay tax on their worldwide income to their country of citizenship.

In practical terms this means that:

– taxation is what distinguishes U.S. citizenship from other citizenships (If July 4 is considered to be a celebration of citizenship, then it should be considered to be a celebration of U.S. citizenship taxation);

– the only practical meaning of U.S. citizenship taxation is that the United States imposes direct taxation according to U.S. tax laws on (1) individuals who are tax residents of other countries and (2) on the non-U.S source income received by those individuals; and

– the United States imposes a more punitive form of taxation on U.S. citizens who live outside the United States than on U.S. citizens who live in the United States (PFIC, GILTI, Subpart F, phantom capital gains tax, FBAR, Form 8938, etc.)

(Incidentally those individuals are also subject to taxation in the countries where they reside.)

In short for U.S. citizens living outside the United States:

U.S. Citizenship = double taxation

A picture or chart is worth a thousand words

The following table will show why those “Born In The USA” and are ALSO born as citizens of another country are born as “preferred citizens”. Significantly they have both the right to NOT be stripped of U.S. citizenship AND the right to renounce U.S. citizenship without being subject to the 877A Exit Tax AND are not impacted by the 2801 “Covered Gift Tax” (meaning they are still permitted to make gifts and/or bequests to U.S. citizens.

Conclusion: The highest form of U.S. citizenship are U.S. citizens who were born with dual citizenship. Specifically those who (1) Became U.S. citizens by being “Born In The USA” and (2) were born as citizens of another country have a much higher standard of U.S. citizenship than any other level of U.S. citizenship. They cannot be stripped of their U.S. citizenship and they have the necessary condition required to expatriate without triggering the U.S.Internal Revenue Code 877A Exit tax or the U.S. Internal Revenue Code 2801 covered gift tax. This is the highest level of U.S. citizenship and is based ONLY on circumstances of birth.

The next level of U.S. citizenship is U.S. citizens born abroad to a U.S. citizen parent who were also born as citizens of another country – dual citizens from birth.

Bottom line: Dual citizenship from birth is extremely valuable. There is NO question that the citizens who Justice Alito finds the most objectionable are the ones who hold the highest level of U.S. citizenship!

Q. Is U.S. citizenship a “caste” system of citizenship?

A. Based on the definition of “caste” found here, it may very well be.

Significantly, what Justice Alito finds problematic (being born a citizen of another country) is precisely the most valuable form of U.S. citizenship.

Bottom line: Not all U.S. citizenship is the same!

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Protection of 14h Amendment - cannot be stripped of citizenshipEligible to be PresidentAble to expatriate and not trigger 877A Exit TaxAble to expatriate and not trigger 2801 covered gift tax
USC - Born In USAYesYesYes if also citizen of another country at birthYes if also citizen of another country at birth
USC - Born Outside USA to USC abroadNoYesYes if also citizen of another country at birthYes if also citizen of another country at birth
Born as citizen of another countryYes if also born in the USAYes if also born as a USC (think Ted Cruz)Yes if also citizen of USA at birthYes if also citizen of USA at birth
Naturalized USCYesNoNo - but tax applies only to period of "US Personness"No
Born outside of USA to a USC parent and becomes US citizen at birth but NOT a citizen of another countryNoYes (think George Romney and John McCain)No because not born a dual citizen from birthNo

John Richardson – Follow me X at @Expatriationlaw

Appendix – Discussion of the Trump v. Barbara case on June 30, 2026

“The IRS has an obligation to meet taxpayers where they live, but it is not doing so for taxpayers living abroad”

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So states the 2025 report of the Taxpayer Advocate!

A January tradition

January is the month that the IRS Taxpayer Advocate release its report for the previous year. In keeping with tradition the Taxpayer Advocate released the 2025 report this week.

Bottom Line:

The report is extraordinary in its recognition of the problems of Americans abroad. The problems are recognized as one of the ten most significant categories of problems experienced by taxpayers generally. The Taxpayer Advocate does a wonderful and powerful job of recognizing the injustices of the U.S. tax system as it applies to taxpayers living outside the United States. The report is available here.

A pdf version of the Taxpayer Advocate report is here:

ARC_Publication-2104_2025_Web

Podcast discussing the report

A condensed version of the podcast is captured in this AI generated video:

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Shedding Light On The U.S. Citizenship Tax System And Prospects For Reform In Australia And More: Latife Hayson and Seth Hertz

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Reproduced from SEATNow.org

Introduction and purpose

In the summer of 2025 Latife Hayson of The Interchange, an Australian living in the United STates included an episode about U.S. citizenship taxation. Although mainly from an Australian perspective, the video (and shorts) will be of interest to U.S. citizens living all over the world.

Full Video:

US Expat Tax Explained: Navigating Citizen-Based Tax Traps & the Push for Residency-Based Taxation

Shorts:

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Sacred Trust: Counseling Americans Abroad Through The Trauma Of A FATCA World

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Introduction:

Much of living as a U.S. citizen abroad is learning to cope with a life of trauma. Posts discussing the trauma are here here, here and here. For Americans abroad, preparing to file a U.S. tax return is a form of trauma.


The U.S. extra-territorial tax, form and penalty regime reminds Americans that they are:

“Subject to certain penalties, for uncertain conduct!

Those who do not file tax returns worry about the consequences of not filing.

Those who do file tax returns worry about the consequences of filing.

Thinking about the issue of trauma, I was reminded of a presentation that I did in 2015 in London, UK. It was titled:

Sacred Trust: Counselling Clients Through The Trauma Of “U.S. Citizenship Abroad” In A FATCAesque World”

(The audience was a group of U.S. tax professionals. I am not sure that they really understood the message. But, the presentation was a welcome diversion from the usual technical tax talk.)

I had forgotten about the presentation, but was reminded of it today. Looking at the slides, I think I agree with everything I said in 2015. If anything, it has gotten worse!

Here is the presentation:

A PDF version is here:

Sacred Trust – Counselling Clients Through the “Trauma of U.S. Citizenship Abroad” in a FATCAesque world – Toronto – February 2015 1

AI Generated Podcast generated from the 2015 presentation

John Richardson – Follow me on X.com @ExpatriationLaw

Tax Law Professors Mason and Dagan: “Reconsidering Citizenship Taxation”

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Introduction and purpose

In 2010 few people even knew what citizenship taxation was. It is now 2025. Awareness of the existence of citizenship taxation has expanded. An understanding of WHAT citizenship taxation actually is (it’s the the U.S. applying its worldwide tax, reporting and penalty regime on non-U.S. source income received by nonresidents) and how it impacts the lives of Americans abroad is still not understood. The nature of citizenship taxation is more fully explored in the following post:

The Road To Tax Reform For Americans Abroad: Part 2 – What Is US Citizenship Taxation?

How tax academics view citizenship taxation

Although, there have been articles about citizenship taxation written by various academics, few if any, have included a description of how U.S. citizenship taxation results in the U.S. imposing a more punitive form of taxation on Americans abroad. Of course, one must have actually experienced the reality (as opposed to the theory) of citizenship taxation to understand it.

To put it another way:

Generally, academics view citizenship taxation purely from the perspective of a U.S. tax return and a U.S. citizen living outside the United States. There is no consideration of how living as a tax resident of another country impacts U.S. tax filing.

Generally, U.S. citizens living outside the United States view citizenship taxation from the perspective of building a live outside the United States (that includes taxation) with the U.S. tax imposed on that life.

These are TOTALLY different perspectives!

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John Richardson Opening Statement May 14, 2014 – House Of Commons FATCA FINA Committee Meeting

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Purpose and introduction:

Prior to Canada’s implementation of FATCA on July 1, 2014, the Canadian parliament held hearings. The hearings took place over two days in May of 2014. I appeared as a witness on Mary 14, 2014. Excerpts from the testimony appear in the above video. What follows is a transcript of my opening statement. I think I would say the same thing today.

https://www.ourcommons.ca/DocumentViewer/en/41-2/fina/meeting-35/evidence

The Chair (Mr. James Rajotte (Edmonton—Leduc, CPC)):

I call this meeting to order.
This is meeting number 35 of the Standing Committee on Finance. Our orders of the day, pursuant to the order of reference of Tuesday, April 8, 2014, are the study of Bill C-31, An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.

Colleagues, we have two panels before us this afternoon.

In the first panel, we’re very pleased to welcome Mr. John Richardson, and, from the Canadian Bankers Association, the acting vice-president, Mr. Darren Hannah. From the Canadian Council of Chief Executives, we have Mr. Brian Kingston, and from the Office of the Privacy Commissioner of Canada, we have Privacy Commissioner Madam Chantal Bernier.

Bienvenue. Each of you will have five minutes maximum for your opening statement.
We’ll begin with Mr. Richardson, please.
[Expand]

Mr. John Richardson (As an Individual):

“Thanks very much for the chance to appear today.

I did take the time to watch yesterday’s session, which was actually enormously helpful to me, as I’m sure it was to you. I have a couple of thoughts, though, that are my own but directly link to that. The signing of the FATCA IGA can be seen as either good news or bad news.

First, interestingly, is the good news. It’s the point that Professor Cockfield made yesterday. In fact, what this does ensure is that Canada is absolutely 100% in compliance, no ifs, ands, or buts about it. That’s what it means to have signed that agreement.

Interestingly, the agreement specifically states that nothing happens until Canada makes it clear that it has done all of the legwork needed to actually implement the agreement, which I would assume to be all of the enabling legislation that we find in Bill C-31. Given that’s the case, as Professor Cockfield pointed out, there’s absolutely no reason to rush this whatsoever, absolutely none. This should not be in the dark recesses of an omnibus bill. It should in fact be brought to see the light of day in a separate bill.

The second aspect of this that’s very interesting in the IGA itself—and this question was asked yesterday—is who this applies to. It applies to U.S. persons and is defined in the agreement as “U.S. citizens or residents”. Now, what is extremely significant is that U.S. citizens are defined solely by the United States today, tomorrow, and forever. That means that someone who is a U.S. citizen today might not be a U.S. citizen tomorrow—and I’ll have more on this as we continue the discussion—but given that the U.S. has the right to define who a citizen is, given that I presume Canada would cede that right to them, I think it’s extremely important, absolutely essential, under any FATCA agreement that the definition of a U.S. citizen could never, never, never include any Canadian citizen who is a resident in Canada.

Third, we’ve got the whole problem of what FATCA actually means. Having watched a few of these committees, I see a lot of technical discussion of FATCA and a lot of discussion of regulations. In other words, there’s a lot of talk about how to implement this agreement, but precious little on what it actually means in terms of the lives of Canadians, and precious little in terms of what it means in terms of the country itself.

The simple fact of the matter is that FATCA, once implemented, will allow the U.S. to put a permanent capital tax on Canada every day of every year for as long as this agreement is in effect, simply by virtue of using U.S. citizens in Canada to tax and siphon revenue out of the country. It is a myth, an absolute myth, and it is completely wrong that under U.S. tax laws, U.S. citizens will not owe tax to the IRS. This is for two reasons. The first is that the U.S. tax code is hostile to anything foreign, and that would include anything in Canada in general, but secondly, anything that involves tax deferral, and it is plainly obvious that all of the pillars of Canadian retirement planning do in fact involve tax deferral.

So it is a myth that U.S. citizens would not owe tax. It is a myth. Interestingly, as I read in something yesterday, the opposite of truth is not the lie: the opposite is in fact the myth. This agreement will have severe consequences for Canada and Canadians.”

What follows is a pdf version:

FINAEV35-E

Here is the video:

https://parlvu.parl.gc.ca/Harmony/en/PowerBrowser/PowerBrowserV2?fk=8332857

A trip down memory lane!

John Richardson – Follow me on X.com @ExpatriationLaw

The New “Seniors” $6000 Deduction Is NOT Available to “Married” U.S. Citizens Living In Canada Unless They File Jointly

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Summary:

In countries where – as per the tax treaty – the U.S. does not have taxing rights to U.S. Social Security and “Social Security Like” equivalents, the standard deduction coupled with the new $6000 bonus $12000 if married and filing jointly) may exclude large numbers of Americans abroad from actually having to pay U.S. tax. My initial reaction is that it will NOT have any impact on the requirement to file a U.S. tax return.

Of particular relevance to Americans abroad (who if married are more likely to use the “married filing separately” category) is that:

If one is married, one MUST file jointly in order to be eligible for this benefit. 71013 of the “Big Beautiful Bill” includes:

v) Married individuals.–If the taxpayer is a married individual (within the meaning of section 7703), this subparagraph shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.

Although it is obvious why this provision is included, it is a negative for Americans abroad who are more likely to use the “married filing separately” category. To put it simply:

If you are an American abroad who is married you benefit from this provision ONLY if you file jointly with your spouse.

Part I – Possible payment of U.s. tax

1. The $6000 is per person ($12000 for a married couple filing jointly) and is an additional deduction from income. (Not available for those who file “married filing separately”!)

2. In Canada: U.S. Social Security, Canada Pension Plan, OAS and certain other pensions are taxed ONLY by Canada. See the U.S./Canada tax treaty – Article XVIII

3. This means that a U.S. citizen living in Canada who is a “Senior” effectively has (explained by the AARP as follows):

Does it replace the existing extra standard deduction for people 65 and older?

No. The new deduction is in addition to the existing extra standard deduction for people age 65-plus. For the 2025 tax year, that’s $2,000 for single taxpayers and $1,600 per qualifying spouse for married couples filing jointly.

As a result, the new $6,000 deduction is stacked on top of both the regular standard deduction — $15,750 for single filers or $31,500 for married couples filing jointly in 2025 — and the 65-plus addition.For instance, a 65-year-old single taxpayer who qualifies for the full $6,000 deduction would be able to deduct a total of $23,750 from these three tax breaks on their 2025 tax return. A qualifying 65-year-old couple could deduct up to $46,700.

What if I’m itemizing?

You can claim the new deduction regardless of whether you itemize your taxes or claim the standard deduction.

If you itemize, you stack the new deduction on top of your itemized deductions. Let’s say you’re single, 65 years old, eligible for the full $6,000 deduction and have $40,000 of itemized deductions. If you have no other deductions, you can lower your taxable income by a total of $46,000.

Bottom line: For $23,750 USD is the deduction from income. This is approximately $32,585.13 CDN (as of today’s exchange rate). Again, this means that a U.S. citizen living in Canada would have to have $32,585.12 (at today’s exchange rates) to have taxable income in the United States.

Benefit: This could really simplify the tax filing because:

– Neither form 2555 nor the FTC 1116 forms might not need to be filed

– meaning the return could conceivably be as simple as: 1040, Schedule B, Form 8333 (possibly) Form 8938, and FBAR. (Depending on your activities other forms might be still be required: Form 8621, Form 5471, etc.

You might be able to file yourself!!


Part II – Who is required to file a U.S. tax return?

According to HR Block (July of 2025):

Do I have to file taxes? Minimum income to file taxes

When it comes to filing, the following taxable income thresholds determine whether you should file a federal return depending on your filing status.

Single filing status:
$14,600 if under age 65
$16,550 if age 65 or older
Married Filing Jointly:
$29,200 if both spouses are under age 65
$30,750 if one spouse is under age 65 and one is age 65 or older
$32,300 if both spouses are age 65 or older
Married Filing Separately — $5 regardless of age
Head of Household:
$21,900 if under age 65
$23,850 if age 65 or older
Qualifying Surviving Spouse:
$29,200 if under age 65
$30,750 if age 65 or older

Some odds and ends:

1. if you are “self-employed” and have more than $400 of income then you are required to file.

2. Note that if your are “married filing separately” you are required to file if your income hits the $5 threshold.

https://www.hrblock.com/tax-center/income/other-income/how-much-do-you-have-to-make-to-file-taxes/

John Richardson – Follow me on X.com/expatriationlaw

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Appendices Generally show that the $6000 is a deduction that is:

1. Separate from the standard deduction; and

2. Is applied in addition to either the standard deduction or itemized deduction

Appendix A – Internal Revenue Code 63 – The Role Of The Standard Deduction

26 U.S. Code § 63 – Taxable income defined

(a) In general

Except as provided in subsection (b), for purposes of this subtitle, the term “taxable income” means gross income minus the deductions allowed by this chapter (other than the standard deduction).

(b) Individuals who do not itemize their deductions In the case of an individual who does not elect to itemize his deductions for the taxable year, for purposes of this subtitle, the term “taxable income” means adjusted gross income, minus—

(1) the standard deduction,

(2) the deduction for personal exemptions provided in section 151,

(3) any deduction provided in section 199A, and
(4) the deduction provided in section 170(p).
(c) Standard deduction For purposes of this subtitle—
(1) In general Except as otherwise provided in this subsection, the term “standard deduction” means the sum of—
(A) the basic standard deduction, and
(B) the additional standard deduction.
(2) Basic standard deduction For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2(a)),
(B) $4,400 in the case of a head of household (as defined in section 2(b)), or
(C) $3,000 in any other case.

https://www.law.cornell.edu/uscode/text/26/63

JR Commentary: The “standard deduction” is different from this new deduction for Seniors

Appendix B – Internal Revenue Code 151 – Additional Personal Deductions

26 U.S. Code § 151 – Allowance of deductions for personal exemptions

(a) Allowance of deductions

In the case of an individual, the exemptions provided by this section shall be allowed as deductions in computing taxable income.
(b) Taxpayer and spouse

An exemption of the exemption amount for the taxpayer; and an additional exemption of the exemption amount for the spouse of the taxpayer if a joint return is not made by the taxpayer and his spouse, and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, has no gross income and is not the dependent of another taxpayer.
(c) Additional exemption for dependents

An exemption of the exemption amount for each individual who is a dependent (as defined in section 152) of the taxpayer for the taxable year.
(d) Exemption amount For purposes of this section—
(1) In general

Except as otherwise provided in this subsection, the term “exemption amount” means $2,000.
(2) Exemption amount disallowed in case of certain dependents

In the case of an individual with respect to whom a deduction under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the exemption amount applicable to such individual for such individual’s taxable year shall be zero.
(3) Phaseout
(A) In general

In the case of any taxpayer whose adjusted gross income for the taxable year exceeds the applicable amount in effect under section 68(b), the exemption amount shall be reduced by the applicable percentage.
(B) Applicable percentage

For purposes of subparagraph (A), the term “applicable percentage” means 2 percentage points for each $2,500 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds the applicable amount in effect under section 68(b). In the case of a married individual filing a separate return, the preceding sentence shall be applied by substituting “$1,250” for “$2,500”. In no event shall the applicable percentage exceed 100 percent.
(C) Coordination with other provisions

The provisions of this paragraph shall not apply for purposes of determining whether a deduction under this section with respect to any individual is allowable to another taxpayer for any taxable year.
(4) Inflation adjustment Except as provided in paragraph (5), in the case of any taxable year beginning in a calendar year after 1989, the dollar amount contained in paragraph (1) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 1988” for “calendar year 2016” in subparagraph (A)(ii) thereof.

(5) Special rules for taxable years 2018 through 2025In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—
(A) Exemption amount

The term “exemption amount” means zero.
(B) References

For purposes of any other provision of this title, the reduction of the exemption amount to zero under subparagraph (A) shall not be taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction, under this section.

(e) Identifying information required

No exemption shall be allowed under this section with respect to any individual unless the TIN of such individual is included on the return claiming the exemption.

https://www.law.cornell.edu/uscode/text/26/151

Appendix C – Relevant Text Of The OBBB

SEC. 70103. TERMINATION OF DEDUCTION FOR PERSONAL EXEMPTIONS OTHER THAN
TEMPORARY SENIOR DEDUCTION.
(a) In General.–Section 151(d)(5) is amended–
(1) by striking “2018 through 2025” in the heading and
inserting “beginning after 2017”,
(2) by striking “, and before January 1, 2026”, and
(3) by adding at the end the following new subparagraph:

(C) Deduction for seniors.–
“(i) In general.–In the case of a taxable year
beginning before January 1, 2029, there shall be allowed a
deduction in an amount equal to $6,000 for each qualified
individual with respect to the taxpayer.
“(ii) Qualified individual.–For purposes of clause
(i), the term `qualified individual’ means–

“(I) the taxpayer, if the taxpayer has attained
age 65 before the close of the taxable year, and
“(II) in the case of a joint return, the
taxpayer’s spouse, if such spouse has attained age 65
before the close of the taxable year.

“(iii) Limitation based on modified adjusted gross
income.–

“(I) In general.–In the case of any taxpayer for
any taxable year, the $6,000 amount in clause (i) shall
be reduced (but not below zero) by 6 percent of so much
of the taxpayer’s modified adjusted gross income as
exceeds $75,000 ($150,000 in the case of a joint
return).
“(II) Modified adjusted gross income.–For
purposes of this clause, the term `modified adjusted
gross income’ means the adjusted gross income of the
taxpayer for the taxable year increased by any amount
excluded from gross income under section 911, 931, or
933.

“(iv) Social security number required.–

“(I) In general.–Clause (i) shall not apply with
respect to a qualified individual unless the taxpayer
includes such qualified individual’s social security
number on the return of tax for the taxable year.
“(II) Social security number.–For purposes of
subclause (I), the term `social security number’ has
the meaning given such term in section 24(h)(7).

“(v) Married individuals.–If the taxpayer is a
married individual (within the meaning of section 7703),
this subparagraph shall apply only if the taxpayer and the
taxpayer’s spouse file a joint return for the taxable
year.”.

https://www.congress.gov/bill/119th-congress/house-bill/1/text

PLAW-119publ21

My Submission To Senate Finance: Discussion Draft – Taxpayer Assistance and Service Act

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Introduction and purpose

On January 30, 2025, The Senate Finance Committee released a proposed a Discussion Draft of the “Taxpayer Assistance And Service Act”

The text of the bill is here:

https://www.finance.senate.gov/imo/media/doc/tax_admin_bill.pdf

The Committee’s commentary on the bill is here:

https://www.finance.senate.gov/imo/media/doc/tas_act_discussion_draft_section_by_section.pdf

The deadline for submissions is/was March 31, 2025. During the evening of March 31, 2025. I drafted this “quick and dirty” submission to make it clear that:

Americans abroad need citizenship-taxation abolished. They do not need improvements to and the retention of citizenship-taxation.

I am including this submission as a blog post so that I don’t forget that I wrote it.
_________________________________________________________________________
Submitted via email to “discussiondraft@finance.senate.gov”

March 31, 2025

Dear Senator Crapo:

Re: Discussion Draft of” Taxpayer Assistance and Service Act”

https://www.finance.senate.gov/imo/media/doc/tax_admin_bill.pdf

I write (briefly and quickly) to comment on the Draft “Taxpayer Assistance and Service Act”.

My comments are restricted to Sections 201 to 206 of the draft bill which purport to address the concerns of U.S. citizens living outside the United States. I emphasize that I am writing in my personal capacity and this letter is separate from the submission from “SEAT” (an organization of which I am part.) While fully supporting SEAT’s submission, upon further reflection, I believe that an additional and more direct submission would be prudent.
In summary, I believe that the draft bill fails to acknowledge, much less address, the injustices inflicted on Americans abroad by the U.S. extra-territorial tax system. The U.S. extra-territorial tax system is generally referred to as “citizenship taxation”. The term “citizenship taxation” obscures what it really is and suggests that it is consistent with the meaning of U.S. citizenship. (I use the terms “citizenship taxation” and “extra-territorial taxation” interchangeably.)

The draft bill is written in a way that assumes that the issue is in the difficulty of compliance. It neither acknowledges nor suggests that the problem is with the substance of citizenship taxation instead of the process of compliance. Because of the sole focus on compliance (while ignoring substance), I believe that the bill is actually dangerous to achieving the tax reform that is needed to achieve fairness, equality and justice for Americans abroad.

Making it easier to comply with a system that is inherently wrong and does not serve the interests of the United States or its citizens is no improvement at all!

I urge the Committee to view this as an opportunity to recognize and address the fundamental injustice of citizenship taxation and NOT simply find ways to make compliance with an unjust system easier. To be clear, citizenship taxation is a system where:

1. The United States imposes taxation on the non-U.S. source income of individuals who do NOT live in the United States. (Example an individual who lives in France is subject to U.S. taxation on his income earned/source in France or even any other non-U.S. country.)

2. The basis of the U.S. claimed right to tax non-U.S. source income is mostly because the individual was born in the United States (regardless of how long or whether that person actually lived in the United States ). Therefore, a person born in the United States who moved permanently from the United States at the age of 10, is somehow supposed to pay the United States tax on non-U.S. source income for the rest of his life? What about a U.S. citizen born outside the United States who never lived in the USA?

3. Citizenship taxation results in double taxation (taxation by two countries on the same income). This is because (1) the country of residence claims the right to tax that income because the person actually lives there AND (2) the U.S. claims the right to tax that same income because the person was born in the United States. (What could go wrong?)

4. The double taxation of Americans abroad is NOT eliminated in all cases by foreign tax credits or the foreign earned income exclusion (contrary to the nonsense that the tax compliance industry and academic community spew).

5. Like resident Americans, Americans abroad may not actually owe money to the IRS every year. But unlike, resident Americans, the compliance burden (the forms and special rules resulting from the non-U.S. source income and assets) for Americans abroad far exceeds that of resident Americans. (It is not uncommon for Americans abroad to pay thousands of dollars a year in tax compliance fees.)

6. As has been noted by the Taxpayer Advocate for many years, Americans abroad are subject to threats of enormous penalties which bear absolutely no relation to the noncompliance.

The cumulative effect of 1 – 6 is that U.S. citizens residing outside the United States suffer:

– extraordinary out of pocket compliance expenses (many pay thousands per year)

– Uncertainty over what the laws mean and how they apply to them

– tremendous anxiety related to fear of penalties (certain penalty for uncertainty conduct)

– the huge opportunity cost of not being to meet the financial planning responsibilities to themselves, their families and their country of residence (the cost is incalculable)

To add insult to injury, the compliance burden is so complex that it takes many Americans abroad months to meet their U.S. tax compliance obligations. For these reasons (coupled with the fear of penalties – the word “foreign” in the Internal Revenue Code is generally followed by the world “penalty”) more and more Americans abroad are renouncing their citizenship. They are NOT renouncing because they don’t want to be U.S. citizens. They are renouncing because of fear of penalties. They are renouncing because they find it impossible to comply with a nonsensical system that is, unique to America, reflects the worst of America and has rules that make compliance very difficult. How would you like to live “life in the penalty box”?


Americans abroad have been begging for relief for many years!

in 2015 the Senate Finance Committee asked for comments and in July of 2015 issued a report on International Tax Reform. On the last page of the report (if anybody got to the last page) appeared the following:

“ F. Overseas Americans
According to working group submissions, there are currently 7.6 million American citizens living outside of the United States. Of the 347 submissions made to the international working group, nearly three-quarters dealt with the international taxation of individuals, mainly focusing on citizenship-based taxation, the Foreign Account Tax Compliance Act (FATCA), and the Report of Foreign Bank and Financial Accounts (FBAR).

While the co-chairs were not able to produce a comprehensive plan to overhaul the taxation of individual Americans living overseas within the time-constraints placed on the working group, the co-chairs urge the Chairman and Ranking Member to carefully consider the concerns articulated in the submissions moving forward.”
Notice that suggestion to “carefully consider the concerns articulated in the submissions moving forward”!

You can read the full report here:

https://adcsovereignty.wordpress.com/wp-content/uploads/2015/07/the-international-tax-bipartisan-tax-working-group-report.pdf

https://theinternationaltaxbipartisantaxworkinggroupreport.tiiny.site/

And if you are interested in some of those submissions from individual Americans abroad you can find them here:
https://www.box.com/citizenshiptaxation

It’s now 2025 (time flies). Another decade has passed. The time has come to consider the problems of citizenship taxation in a “substantive sense”. The time has come to abolish citizenship taxation altogether. The draft bill under consideration perpetuates the injustice.

No! it’s NOT radical to consider ending citizenship taxation.

Senator Crapo, you are a Republican.

You are certainly aware that our Republican President Donald J. Trump pledged to end the “double taxation” of Americans abroad during his campaign.

You are certainly aware that Republican Congressman LaHood, in support of President Trump’s pledge to end the “double taxation” of Americans abroad, introduced a Bill to end the double taxation of Americans abroad (by allowing them to opt to be taxed as though they were nonresident aliens).

There is clear momentum toward ending citizenship taxation. Ending citizenship taxation means that U.S. citizens living outside the United States would be taxable by the United States on ONLY their U.S. source income. (By the way, this is NOT radical. This is the international standard. This is how the rest of the world operates.)
The Draft “Taxpayer Assistance and Service Act” does “not much” for Americans abroad. Yes, compliance with U.S. citizenship taxation is a problem. But, the real problem is the unjust system of citizenship taxation to begin with. You don’t solve a problem by alleviating the symptoms of the problem You solve the problem by – well, getting rid of the problem.

U.S. citizenship taxation is an issue for more than individuals living outside the United States. It’s an issue for America as a country. It’s an issue for U.S. corporations. As it stands, U.S. citizenship taxation:

– Provides disincentives for U.S. multinationals to hire U.S. citizens abroad

– Provides huge disincentives for U.S. entrepreneurs to create businesses abroad

– Even makes it difficult for Americans to even open bank accounts outside the United States

U.S. citizenship taxation does not serve the interests of America as a whole!

The time has come to bring the injustice of U.S. citizenship-based taxation to an end.

Q. How can ending U.S. citizenship taxation be achieved?

A. To change U.S. tax rules so that U.S. citizens abroad are taxed as though they are nonresident aliens (only on their U.S. source income)

Senator Crapo, I urge you to join with President Trump and Congressman LaHood to bring the U.S. practice of citizenship taxation to an end! It’s time for the U.S. to stop imposing U.S. taxation on the non-U.S. source income of nonresident citizens!

You will be on the right side of history! You will participate in ending a great injustice rather than playing a role in perpetuating that injustice!

John Richardson

Toronto, Canada

John Richardson – Follow me on X.com @ExpatriationLaw

____________________________________________________________________________

Appendix A:

A PDF version of the letter is here (feel free to share if you like:

Discussion Draft of Taxpayer Assistance and Service Act

Appendix B:

A post that I wrote announcing the 2015 Senate Finance Report is here:

https://adcsovereignty.wordpress.com/2015/07/08/cbtlawsuit-first-report-of-senate-finance-committee-brings-citizenship-taxation-lawsuit-one-step-closer/

Appendix C:

The 2015 Senate Finance Report is here:

https://adcsovereignty.wordpress.com/wp-content/uploads/2015/07/the-international-tax-bipartisan-tax-working-group-report.pdf

Appendix D:

John Richardson, et al additional submission to the Senate Finance Committee in 2014:

https://citizenshipsolutions.ca/2014/01/24/submission-to-the-senate-finance-committee-on-citizenship-based-taxation/

Submission to the Senate Finance Committee on Citizenship-based taxation

FAIRTax – The Solution For America And For Americans Abroad – Jim Bennett

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On March 13, 2025 I am hosting Jim Bennett of Fair Tax fame as part of my “X Spaces” Discussion series.

Here is a recent article he wrote explaining why:

1. The Fair Tax would be an alternative for all Americans; and

2. Why the Fair Tax would solve the problems of Americans abroad.

Read his article here:

FAIRtax – The Solution for Americans Abroad

John Richardson – Follow me on X.com @ExpatriationLaw