# Can someone lose a federal pension if they renounce USA citizenship? **URL:** \ **Category:** Factual Questions\ **Created:** [January 3, 2017, 5:00pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238 "2017-01-03T17:00:10Z")\ **Posts on this page:** 13\ **Page:** 2
**Author:** ![susan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/susan/32/17537_2.png) [@susan](https://boards.straightdope.com/u/susan)\ **Post date:** [January 5, 2017, 3:53am UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/21 "2017-01-05T03:53:01Z")
Okay, retain “the right…” I apologize for putting the word “retain” in the quote. It was an error. ---
**Author:** ![Rysto](https://avatars.discourse-cdn.com/v4/letter/r/ecccb3/32.png) [@Rysto](https://boards.straightdope.com/u/Rysto)\ **Post date:** [January 5, 2017, 3:59am UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/22 "2017-01-05T03:59:17Z")
> [@Eva\_Luna](#): > > To those wondering about the requirement to pay U.S. taxes when living abroad - even if you don’t meet the criteria for days spent outside the U.S. in any given year, typically the way it works is that you get credit for taxes paid to the country where you reside (with some tweaks according to the terms of various bilateral dual taxation agreements). So if you’re already paying taxes somewhere like an EU country or Canada, you are likely not to owe additional U.S. taxes. [Here’s more info, from the horse’s mouth.](https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-about-international-individual-tax-matters#GeneralFAQs) For tax on employment income, this is correct. However, there can be a number of nasty corner cases. One of the worst has hit a number of Americans living in Canada: under Canadian tax law, no capital gains taxes are charged on the sale of your personal home. However, this is not the case under US law. This means that if anybody subject to US tax, like US citizens or (IIRC) green card holders, is living in Canada and sells their home, they will find themselves owing a gigantic tax bill to the IRS. This applies even to people who have no real connection to the US, like people born to Canadian parents while they were visiting the US who have since spent their entire lives in Canada. Edit: It’s important to note that US citizens not living in the country are required to file a return with the IRS even if they owe no tax. The penalties for not doing so for a number of years can be enormous. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [January 5, 2017, 4:16am UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/23 "2017-01-05T04:16:32Z")
> [@Balthisar](#): > > If he lives outside of the USA the only taxes he has to pay are those over a MAGI of approximately $90,000. As he’s a pensioner, he’s probably not making this, meaning he has no taxes to pay. > > Having just finished a five year overseas stint myself, I can attest that ObamaCare is not needed outside of the USA. That 90K figure only applies to _earned_ income. [cite](https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion) > [@IRS page](#): > > Not foreign earned income: Foreign earned income does not include the following amounts: > > [ul] > [li]Pay received as a military or civilian employee of the U.S. Government or any of its agencies[/li][li] Pay for services conducted in international waters (not a foreign country)[/li][li] Pay in specific combat zones, as designated by an Executive Order from the President, that is excludable from income[/li][li] Payments received after the end of the tax year following the year in which the services that earned the income were performed[/li][li] The value of meals and lodging that are excluded from income because it was furnished for the convenience of the employer[/li][li] **Pension or annuity payments, including social security benefits** [/li][/ul] So, he might well owe taxes to the US on his pension income, though it might not be a lot. And I’d presume he’s still eligible for Medicare. While that’s of no use to him in Mexico, it would cover him if he returns to the US for treatment after he turns 65. If he needs treatment _before_ age 65, and hasn’t been paying for US insurance, he’d be better off going almost anywhere else in the world. Hell, despite all the horror stories about shady clinics in Mexico, there are surely perfectly good hospitals there as well that could treat him. The OP’s friend has (I presume) not actually _renounced_ his citizenship - in effect, he is a dual citizen which keeps him eligible to return to the US any time he wants to. Naturalizing as a Mexican citizen _might_ do it per [this page](https://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/citizenship-and-dual-nationality.html): > [@State Department](#): > > if they perform certain specified acts voluntarily and _ **with the intention to relinquish U.S. nationality** _. Briefly stated, these acts include: > …obtaining naturalization in a foreign state upon one’s own application after the age of 18 (bolding mine) I’d guess that the “with the intention” is the tricky part to prove and [probably doesn’t apply to him](http://www.nolo.com/legal-encyclopedia/can-naturalized-us-citizen-lose-citizenship-living-another-country.html). > [@Nolo](#): > > And in any case, there’s that “intention” element of the statute; the very reason that many people can become dual citizens of the U.S. and another country ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [January 5, 2017, 4:22am UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/24 "2017-01-05T04:22:25Z")
> [@Rysto](#): > > For tax on employment income, this is correct. However, there can be a number of nasty corner cases. One of the worst has hit a number of Americans living in Canada: under Canadian tax law, no capital gains taxes are charged on the sale of your personal home. However, this is not the case under US law. This means that if anybody subject to US tax, like US citizens or (IIRC) green card holders, is living in Canada and sells their home, they will find themselves owing a gigantic tax bill to the IRS. This applies even to people who have no real connection to the US, like people born to Canadian parents while they were visiting the US who have since spent their entire lives in Canada… I wonder about that specific example. In reality, very few people pay capital tax gains on the sale of their homes in the US. Provided you’ve lived there long enough (2 out of the past 5 years, I think) you can exclude 250,000 (single) or 500,000 (married) of your gains. A profit large enough to trigger that would be pretty rare unless you’ve owned the place for 40 years or bought right before an insane housing bubble and sold just before the bubble popped, or some other situation. I don’t know if there are special situations that would invalidate that if you live outside the US. And certainly it might apply to sales of stocks and the like. As far as children born of foreign parents: wouldn’t the child have to declare US citizenship at age 18 or something? I honestly have no clue how that works. But if such a person never lived or worked in the US, I doubt the IRS would twig to the situation but I suppose it could happen! ---
**Author:** ![rbroome](https://avatars.discourse-cdn.com/v4/letter/r/838e76/32.png) [@rbroome](https://boards.straightdope.com/u/rbroome)\ **Post date:** [January 5, 2017, 1:03pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/25 "2017-01-05T13:03:41Z")
> [@susan](#): > > So he doesn’t want to pay for insurance but wants to “retain the right to return to USA for life saving treatment he wouldn’t get, or wouldnt want to risk, in mexico”? Paid for by, say, me and the rest of us? Uh, please read the OP. Some other poster brought up the life-saving treatment issue, something which the OP never mentioned and made clear isn’t under consideration. “no plans to ever return” seems pretty clear. Don’t worry about paying for someone else’s healthcare. The OP’s friend will not be burdening you with any big bills. ---
**Author:** ![Lord\_Feldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lord_feldon/32/341_2.png) [@Lord\_Feldon](https://boards.straightdope.com/u/Lord_Feldon)\ **Post date:** [January 5, 2017, 1:18pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/26 "2017-01-05T13:18:38Z")
> [@Mama\_Zappa](#): > > As far as children born of foreign parents: wouldn’t the child have to declare US citizenship at age 18 or something? No. A child born in the USA to foreign parents is a citizen immediately and fully and _forever_, unless they renounce it as an adult. But they have to know about it to renounce it. A bunch of people in that situation have gone through life ignorant of their US citizenship and have only found after years of not filing tax returns. ---
**Author:** ![Rysto](https://avatars.discourse-cdn.com/v4/letter/r/ecccb3/32.png) [@Rysto](https://boards.straightdope.com/u/Rysto)\ **Post date:** [January 5, 2017, 4:15pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/27 "2017-01-05T16:15:35Z")
> [@Mama\_Zappa](#): > > As far as children born of foreign parents: wouldn’t the child have to declare US citizenship at age 18 or something? I honestly have no clue how that works. But if such a person never lived or worked in the US, I doubt the IRS would twig to the situation but I suppose it could happen! Historically true, but thanks to [FATCA](https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act), which requires foreign banks with US operations to submit information about non-US domiciled accounts to the IRS, these people are starting to show up on the IRS’ radar after a lifetime of not needing to worry about it. Some Googling indicates that the $250K exclusion does apply to expatriates, but with houses selling for $1-million+ in Toronto and Vancouver, a US citizen could still face a nasty tax bill. One final problem: the IRS calculates all this in US dollars. This means that big exchange rate movements can utterly screw you. The Canadian dollar over the past 2 decades has ranged from less than $0.65 USD to over $1.00 USD. Poor timing could cause a US citizen to owe a significant amount of money on phantom profits. ---
**Author:** ![barath\_s](https://avatars.discourse-cdn.com/v4/letter/b/90ced4/32.png) [@barath\_s](https://boards.straightdope.com/u/barath_s)\ **Post date:** [January 6, 2017, 1:37am UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/28 "2017-01-06T01:37:14Z")
The case of Adam kis and his pension was interesting. He had to relinquish us citizenship to run for the Lithuanian presidency. This lost him his social security, pension (based on governmental agreement, the us and Lithuania had none) , right of travel in the us and put him in jeopardy of the expatriate tax. His congressional friend mr dustbin introduced a bill to restore these. > **[EX-CITIZEN ADAMKUS HAS PAL IN DURBIN](https://www.chicagotribune.com/news/ct-xpm-1999-08-08-9908080226-story.html)** [https://www.gpo.gov/fdsys/pkg/CREC-1999-07-14/html/CREC-1999-07-14-pt1-PgS8505-4.htm](https://www.gpo.gov/fdsys/pkg/CREC-1999-07-14/html/CREC-1999-07-14-pt1-PgS8505-4.htm) I read somewhere else that his pens was twice his Lithuanian presidency salary. From this, I conclude that OP’s friend should endeavor to become president of mexico and cultivate congressional friends in the us, to maximize benefits ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [January 6, 2017, 3:29pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/29 "2017-01-06T15:29:46Z")
> [@Rysto](#): > > Historically true, but thanks to [FATCA](https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act), which requires foreign banks with US operations to submit information about non-US domiciled accounts to the IRS, these people are starting to show up on the IRS’ radar after a lifetime of not needing to worry about it. > > Some Googling indicates that the $250K exclusion does apply to expatriates, but with houses selling for $1-million+ in Toronto and Vancouver, a US citizen could still face a nasty tax bill. > > One final problem: the IRS calculates all this in US dollars. This means that big exchange rate movements can utterly screw you. The Canadian dollar over the past 2 decades has ranged from less than $0.65 USD to over $1.00 USD. Poor timing could cause a US citizen to owe a significant amount of money on phantom profits. The FATCA would only apply if the bank knew that the customer was also a US citizen, right? I mean, the law would apply in general but neither the customer nor the bank would know about reporting it. And for houses selling for over 1 million: the 250 / 500K exclusion is on the profits, not the sale price. So if Joe Unknownuscitizen bought the place for 900K and sold for 1M, that’s only 100K in profit and therefore not taxable. Good point on the exchange rate though. I wonder if the IRS calculates the profit using the rate at purchase price conmpared to the rate at the time of sale. So that 900K to 1M profit might look larger if the rate at purchase time made it, say, 700K US dollars and the rate at selling time made it 1.2 M US dollars. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [January 6, 2017, 3:34pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/30 "2017-01-06T15:34:57Z")
> [@barath\_s](#): > > The case of Adam kis and his pension was interesting. > > He had to relinquish us citizenship to run for the Lithuanian presidency. This lost him his social security, pension (based on governmental agreement, the us and Lithuania had none) , right of travel in the us and put him in jeopardy of the expatriate tax. His congressional friend mr dustbin introduced a bill to restore these. > > [http://articles.chicagotribune.com/1999-08-08/news/9908080226\_1\_durbin-social-security-trust-funds](http://articles.chicagotribune.com/1999-08-08/news/9908080226_1_durbin-social-security-trust-funds) > > [Congressional Record, Volume 145 Issue 99 (Wednesday, July 14, 1999)](https://www.gpo.gov/fdsys/pkg/CREC-1999-07-14/html/CREC-1999-07-14-pt1-PgS8505-4.htm) > > I read somewhere else that his pens was twice his Lithuanian presidency salary. > > From this, I conclude that OP’s friend should endeavor to become president of mexico and cultivate congressional friends in the us, to maximize benefits Or, at the very least, the OP should NOT explicitly revoke his US citizenship: > [@Chicago Tribune](#): > > “This is a very rare situation,” Durbin continued. “I like to think I’m a student of history, but I can’t think of the last time an American renounced his citizenship to become president of a foreign country.” > > In addition to Social Security, the legislation also would safeguard retirement benefits Adamkus earned as an administrator for the U.S. Environmental Protection Agency. I’d presume his Medicare would also be impacted if social security were taken away, but as he lives in Mexico that’s a non-issue. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [January 6, 2017, 4:52pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/31 "2017-01-06T16:52:42Z")
> [@Mama\_Zappa](#): > > The FATCA would only apply if the bank knew that the customer was also a US citizen, right? I mean, the law would apply in general but neither the customer nor the bank would know about reporting it. Ignorance of the law is not a defense. If you are a US citizen, your worldwide income is subject to IRS requirements. When I lived overseas I dutifully filled my tax US tax returns, even though my income was below the foreign exclusion level. Since returning to the US I am required to complete Treasury forms (in addition to IRS forms) because I have retirement money overseas. I have to be meticulous in my annual reporting because an error that might generate an audit gets me placed in a permanent audit list, among other things. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [January 13, 2017, 9:48pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/32 "2017-01-13T21:48:52Z")
> [@Duckster](#): > > Ignorance of the law is not a defense. If you are a US citizen, your worldwide income is subject to IRS requirements. When I lived overseas I dutifully filled my tax US tax returns, even though my income was below the foreign exclusion level. Since returning to the US I am required to complete Treasury forms (in addition to IRS forms) because I have retirement money overseas. I have to be meticulous in my annual reporting because an error that might generate an audit gets me placed in a permanent audit list, among other things. Understood, but my point is that if the person in question was utterly unaware of the fact that s/he was considered a US citizen, never worked in the US, and never had holdings in a US institution, it seems unlikely that the IRS would ever find out. And of course, I presume the IRS’s enforcement powers are limited in this situation even if they DID find out. Some people I knew a couple decades ago might conceivably run into this at some point. The husband was on a 2-year assignment in the US. They were actually told not to come until the wife delivered their baby. They complied - but then she got pregnant and had their second child here. The lad is technically a US citizen, and just about 21 years old. As far as I know they’ve never done anything about it. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [January 13, 2017, 10:00pm UTC](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238/33 "2017-01-13T22:00:25Z")
Well, at least a US-born child raised abroad no longer has to worry about the draft. (which, incidentally I’m told, also applied to foreign students living in the US). The big issue with FACTA, too, was the requirement to declare foreign assets over $100,000. That’s not a difficult number to reach for retirement savings plans similar to the US’s 401K. Also, foreign banks have typically dropped US customers like a hot potato. The penalty for failing to report US customers to the IRS, was IIRC about a 30% fine on all transactions the bank did with US banks. The bank and even the customer may have been honestly ignorant of his citizenship, but if the US bureaucracy isn’t convinced (or chooses not to be convinced) then it can get \*very \*expensive for the bank. A lawyer telling them they might get their money back in a year or three when the appeals are done is not exactly comforting. [Previous page](https://boards.straightdope.com/t/can-someone-lose-a-federal-pension-if-they-renounce-usa-citizenship/776238.md?page=1)