By Dako
For a long time I filed the green card question under “not urgent.” We haven’t decided whether we’re moving to Japan, splitting the year, or staying put. So the card just sits there, doing its job, waiting for us to figure the rest out. Nothing to decide yet.
That was the mistake. Not a factual mistake, exactly, more of a framing one. I’d been treating the card as a neutral object that costs nothing while we think, and it isn’t. It’s a subscription, and the price renews every filing season whether or not we’ve made up our minds. Worse, one of its terms changes each year we wait.
Here’s what keeping it actually costs a household that hasn’t chosen yet, and why the waiting itself is the part I’d underestimated.
The card doesn’t switch off when you leave
Start with the thing almost everyone gets backwards. A green card holder is a US tax resident on worldwide income, no matter where in the world you happen to be sleeping. Old news, and we’ve been through it. What surprised me is how hard that status is to end.
Under section 7701(b)(6), the status keeps running until one of three things happens. You hand the card back on Form I-407. Or an immigration officer or a judge determines that you abandoned it somewhere along the way and never said so. Or you take a treaty position as a resident of another country and don’t waive the treaty benefits.
Notice what isn’t on that list. Moving abroad isn’t on it. Staying abroad for years isn’t on it. Even letting the plastic expire isn’t on it. The IRS has been explicit that an expired card and an abandoned status are two different things, and the date printed on the plastic has nothing to say about your tax residency. You can be a person no airline would board and still owe a US return.
So “we’ll just see how it goes over there” pauses nothing. The card follows you.
What the subscription actually includes
While the card is live, the whole US compliance stack is live with it. Not the scary parts of the tax code, mostly. The tedious ones.
Foreign accounts get reported. FBAR kicks in once your foreign accounts together cross $10,000 at any moment in the year. That threshold has never been adjusted for inflation, which is why an ordinary Japanese bank account can trip it. Form 8938 comes with friendlier numbers for people actually living abroad. An individual filer reports above $200,000 at year end or $300,000 at any point in the year, and those figures double on a joint return. Friendlier, but not absent.
Then there’s the trap that catches people who move first and read later. Japanese mutual funds and ETFs are PFICs to the US tax system, which is its own unpleasant post. And the exclusion everyone’s heard of, the foreign earned income exclusion, only covers earned income. Wages. It does nothing for dividends, capital gains, or interest. For anyone planning to eventually live on investment income, the famous exclusion is aimed at the wrong income.
None of this is fatal. Foreign tax credits keep you from paying twice on the same money, and this stack is survivable for years at a stretch. It’s just not free, and it’s not zero effort, and it doesn’t lighten because you moved.
The clock that runs while you decide
The exit tax doesn’t apply to every green card holder who gives up the card. It applies to long-term residents, and the definition is arithmetic: a lawful permanent resident in at least 8 of the last 15 tax years, counting back from the year the residency ends. Cross that line and giving up the card puts you through the covered expatriate tests, with the mark-to-market machinery waiting behind them. Stay under it, and handing back the card is paperwork.
Two details make this sharper than it looks. First, the count runs on tax years rather than anniversaries, so in practice a card issued late in a year generally makes that whole year one of your eight. Second, there’s a carve-out: a year in which you were treated as a resident of another country under a treaty, without waiving those benefits, doesn’t count toward the eight. Which is a real lever, and also a live wire. Using it after you’ve already hit eight years is itself a deemed expatriation, and we pulled that one apart separately.
Now put the clock next to the indecision. Every year we spend not choosing is a year that gets added to the total. At some point the eighth one arrives on an ordinary Tuesday, with no letter and no notification. The option that used to be “hand the card back and walk away” has quietly become “hand it back and find out what you owe.”
That’s the cost of not deciding. Not a fee. A door closing slowly enough that you don’t hear it.
A reentry permit fixes the wrong problem
When I first started reading about long absences, the reentry permit looked like the answer. File Form I-131, get up to two years of protected travel, come and go. If you’ve already spent more than four of the last five years outside the country, you get one year instead of two. We looked into the rules. We’ve never filed one.
Good thing, because it solves an immigration problem, not a tax one. A reentry permit doesn’t preserve your US tax residency and it doesn’t end it. Your filing obligation is identical with the permit and without it. It doesn’t even guarantee entry: an officer at the border can still conclude from the shape of your life that you’ve abandoned the card, permit in hand.
And it does something else that matters if citizenship is anywhere in your thinking.
Naturalization requires continuous residence: five years as a permanent resident, or three if you’re married to and living with a US citizen. Physical presence has to be real, too. Thirty months out of those five years, 18 out of the three.
An absence longer than six months raises a presumption that your continuous residence broke, which you can argue against with evidence of the life you kept here. An absence of a year or more breaks it outright, no argument available, clock back to zero. Form N-470 can protect the residence requirement, but only for narrow categories of people employed abroad by qualifying US institutions and companies. A couple deciding where to live doesn’t fit any of them.
So the document that lets you spend years abroad is the same document that leaves citizenship unprotected at the end of those years. Two fixes pulling against each other, and you get to pick which problem you’d rather have.
Naturalizing closes one door and welds another shut
Which brings me to the option we’re leaning toward, and the reason I still hesitate.
Becoming a citizen ends the fragility. No abandonment findings, no reentry permits, no officer at the border reading your travel history. On taxes it changes nothing at all: citizens are taxed on worldwide income exactly the way green card holders are, and the same reporting forms show up.
But it does one thing that’s permanent, and if you’re anywhere near year eight this is the part to sit with. That 8-of-15 test is a gateway, and the gateway exists only for green card holders. Section 877A treats two kinds of people as expatriates: long-term residents who stop being permanent residents, and citizens who give up citizenship. Same covered expatriate tests for both. The difference is that a citizen has no 8-year threshold to fall under. Renounce in year one or year forty, and you go through the tests either way.
So naturalizing doesn’t create an exit tax. It removes the possibility of ever being under the line again. The escape hatch that a green card holder keeps until year eight gets welded shut in exchange for permanence.
For 2026, the tests that decide whether you’re a covered expatriate use an average annual net income tax of $211,000 and a net worth of $2 million. Land in the category and $910,000 of gain is excluded before the tax bites. Those numbers move most years. The structure doesn’t.
Where we’re leaning, and what we’re doing about it
We’re leaning toward naturalizing. Not because we’ve solved the underlying question. We still don’t know whether we end up in Japan, in the US, or in some annual rotation between them. The shape of that life is undecided down to the month split, the city, and the year.
The lean comes out of the paragraph above, the one I can’t unread. Even with the right paperwork in hand, a permanent resident’s standing comes down to somebody’s judgment about the shape of her life. Certainty about our status looks worth more to us right now than keeping the year-eight exit open.
I’m not fully at peace with it. Trading a temporary way out for a permanent obligation is a real trade, and I’d rather make it deliberately than drift into it.
What changed is smaller than a decision and more useful than a feeling. The clock stopped being background. “Maybe we spend a year over there” isn’t a lifestyle question anymore; it’s a question about what that year does to the 8-of-15 count and to the continuous residence a citizenship application would need. Same sentence, two hidden price tags.
If you’re reading this from the same fork, one more thing to weigh. If you’re the Japanese national in a couple like ours, Japan’s five-year non-permanent resident window doesn’t apply to you at all, so your landing there is harder than your American spouse’s from day one. There’s no version of this where waiting makes the math easier. Count your years before you plan your calendar.
FAQ
If I move abroad and stop using my green card, do I stop being a US taxpayer?
No. Permanent resident status continues for tax purposes until you formally abandon it on Form I-407, until immigration authorities or a court determine it’s abandoned, or until you take a treaty residence position in another country. An expired card is not an abandoned status.
Does a reentry permit change my US tax situation?
Not at all. It’s an immigration document that helps you re-enter after a long absence. Your worldwide filing obligation, FBAR, and Form 8938 are identical with or without it, and the permit doesn’t protect the continuous residence you’d need for naturalization.
Is it better to naturalize or give up the green card before eight years?
That depends on numbers and plans specific to you, and it’s genuinely a decision to make with a cross-border professional rather than from an article. What’s worth knowing before that conversation is the shape of the trade. The 8-of-15 threshold exists only for green card holders, so naturalizing removes it permanently. Surrendering the card before year eight generally keeps you out of the exit tax rules entirely. Both are decisions with deadlines attached.
This article is general information about US tax and immigration rules for permanent residents, not tax or legal advice. Expatriation, naturalization, and treaty positions carry serious and often irreversible consequences. Please talk to a qualified cross-border tax professional and an immigration attorney before acting, and see our Disclaimer for details.