Big Threat: Denaturalized USA Citizens Can't Escape Exit Tax

Many naturalized U.S. citizens — especially wealthy ones — are facing a hidden threat; a tax law that kicks in even when their citizenship is taken away against their will.

Called the exit tax, it treats them as if they sold all their assets worldwide the day before they lost citizenship, and taxes them on the gains.

For example, someone with a house in India and stocks in the U.S. would owe tax on both — even if they never sold anything. Their family in the U.S. could also face a 40% tax on any future inheritance or gifts from them.

This becomes more alarming under recent federal policy changes.

The Trump administration pushed for more denaturalization — removing citizenship from those who gained it through fraud or misrepresentation.

Legal experts warn that even decades-old applications might be reviewed. Courts usually require strong proof for such actions, but the risk still creates fear.

Some may argue they were never true citizens to escape the tax, but under tax law, that likely won’t work. They’re counted as citizens until the court cancels their status.

Green card holders aren't safe either. If they lose their status after years in the U.S., they may also face the exit tax. Honest paperwork, legal advice, and careful planning are key.

In California, this issue is especially urgent. The state has 5.6 million naturalized citizens — nearly a quarter of the nation’s total — so any federal denaturalization campaign could hit California hard.

Even people who’ve lived here for decades without any criminal history are growing anxious.

The Justice Department says it’s targeting fraud and crime, but experts warn that simple application errors — like forgetting to list a past address — could open the door to revocation.

While California offers some immigration protections, it cannot stop federal enforcement. In civil denaturalization cases, people don't even get a free lawyer.

This legal gray area and rising fear may discourage people from speaking out or participating publicly.

Even the threat of losing citizenship is enough to create widespread fear, especially under aggressive policies that use denaturalization as a political tool.