Dual Citizenship: Benefits and Complications for American Expats

# Dual Citizenship: Benefits and Complications for American Expats

The U.S. government will let you carry a second passport. It just won't recommend it. According to the U.S. Department of State, "U.S. law does not require a U.S. citizen to choose between U.S. citizenship and another (foreign) nationality," and a citizen "may naturalize in a foreign state without any risk to their U.S. citizenship." In the same breath, State adds that it "does not endorse dual nationality as a matter of policy because of the problems which it may cause" ([U.S. Department of State, Dual Nationality](https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/Relinquishing-US-Nationality/Dual-Nationality.html)).

Here is the fact that surprises most Americans abroad: acquiring a second citizenship does almost nothing to change your relationship with the IRS. The United States is one of only two countries in the world—the other is Eritrea—that taxes its citizens on worldwide income regardless of where they live. A German-American living in Munich files a U.S. tax return on the same income Germany already taxes. That single reality shapes nearly every benefit and complication that follows.

This article covers what U.S. law actually permits, the concrete advantages of a second passport, the tax and legal obligations that come with it, and what renouncing would cost if you ever decide the math no longer works.

What U.S. Law Actually Says

For most of the 20th century, the government could strip your citizenship for "expatriating acts" like voting in a foreign election or naturalizing elsewhere. That changed with two Supreme Court decisions.

In *Afroyim v. Rusk*, 387 U.S. 253 (1967), decided May 29, 1967, the Court held that Congress cannot revoke citizenship unless the person *voluntarily and intentionally* relinquishes it. The case involved Beys Afroyim, a naturalized citizen whose passport renewal was denied after he voted in an Israeli election ([Afroyim v. Rusk, Justia](https://supreme.justia.com/cases/federal/us/387/253/)). *Vance v. Terrazas* (1980) reinforced that the government must prove intent to surrender citizenship, not merely that an expatriating act occurred.

Following those rulings, in 1990 the State Department adopted an administrative presumption that a citizen who performs a potentially expatriating act—such as obtaining foreign nationality or taking a routine oath of allegiance abroad—*intends to keep* U.S. citizenship ([7 FAM 1220, Developing a Loss-of-Nationality Case](https://fam.state.gov/FAM/07FAM/07FAM1220.html)). In practice, this means becoming a citizen of another country does not jeopardize your American passport. Loss of nationality today generally requires a deliberate, formal renunciation.

Two standing obligations apply to every dual national. First, you "owe allegiance to both the United States and the foreign country." Second, you "must use a U.S. passport to enter and leave the United States," even if you also hold a foreign passport ([U.S. Department of State, Dual Nationality](https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/Relinquishing-US-Nationality/Dual-Nationality.html)).

The Benefits Are Real and Concrete

A second citizenship is not abstract—it changes what you can legally do.

• **Unrestricted residence and work.** A second passport typically grants the right to live and work without a visa, work permit, or residency renewal. An American who naturalizes in any EU member state gains the right to live and work across all 27 EU countries under freedom-of-movement rules, plus visa-free or visa-on-arrival access to far more destinations than a single passport allows.
• **Property and business ownership.** Many countries restrict real-estate purchases, business licensing, or land ownership to citizens or impose extra steps on foreigners. Citizenship removes those barriers.
• **Access to public services.** Citizens generally qualify for national healthcare systems, subsidized university tuition, and social benefits that residents on temporary visas cannot reach.
• **Political and legal standing.** You can vote, run for many offices, and access consular protection from your second country when traveling in third countries.
• **A hedge against immigration policy.** Because the U.S. cannot involuntarily strip citizenship without proof of intent to renounce, holding both gives you durable optionality—you keep the right to return to and work in the United States indefinitely.

For families, the advantages compound. Children born abroad to a U.S.-citizen parent may acquire both nationalities at birth, securing rights in two countries before they are old enough to choose.

The Tax Complication Is the Big One

Citizenship-based taxation is the obligation most expats underestimate. The duties below apply to U.S. citizens regardless of where they live or whether they also pay tax to another government.

**You still file a U.S. return.** Any citizen whose income exceeds standard filing thresholds must file Form 1040 reporting worldwide income, every year, from anywhere.

**The Foreign Earned Income Exclusion helps but doesn't erase the obligation.** Using Form 2555, qualifying expats can exclude up to **$130,000 of foreign earned income for tax year 2025**, rising to **$132,900 for 2026** ([IRS, Figuring the Foreign Earned Income Exclusion](https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion); [IRS, Instructions for Form 2555](https://www.irs.gov/instructions/i2555)). The exclusion is not automatic—you must elect it each year, meet either the bona fide residence test or the 330-day physical presence test, and it applies only to earned income (wages, salary, self-employment), not investment income.

**You must report foreign bank accounts.** If the aggregate balance of your foreign financial accounts exceeds **$10,000 at any point during the year—even for a single day**—you must file FinCEN Form 114 (the FBAR) electronically with the Treasury's Financial Crimes Enforcement Network. It is informational and creates no tax, but the deadline is April 15 with an automatic extension to October 15, and penalties for non-filing are severe ([IRS, Report of Foreign Bank and Financial Accounts (FBAR)](https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar)).

**FATCA makes this hard to ignore.** The Foreign Account Tax Compliance Act, enacted in 2010, requires foreign financial institutions to report accounts held by U.S. persons directly to the IRS. A practical side effect: some foreign banks now refuse American clients to avoid the compliance burden, making it harder for dual nationals to open ordinary accounts.

The good news is that double taxation is usually avoidable through the Foreign Earned Income Exclusion, the Foreign Tax Credit, and tax treaties. But avoidance requires *filing the right forms*—the obligation itself never lapses while you hold the passport.

Non-Tax Complications

Beyond money, dual status creates practical friction:

• **Reduced consular protection.** When you are in the country of your *other* nationality, that country may treat you solely as its own citizen. The State Department warns that dual nationals "may face restrictions in the U.S. consular protections available" there—if you are detained in your second country, U.S. officials may have limited ability to intervene.
• **Military and civic obligations.** Some countries impose mandatory military service or other duties on their citizens, including dual nationals who may not even reside there.
• **Conflicting laws.** "Claims of other countries upon U.S. dual-nationals may result in conflicting obligations" under each country's laws—on inheritance, family law, or compulsory service.
• **Passport rules at the border.** Forgetting to carry your U.S. passport when entering the United States can cause real delays, since the law requires citizens to use it.

If You Decide to Renounce

Some Americans abroad conclude the tax-filing and reporting burden outweighs the benefits of keeping U.S. citizenship. Renunciation is a formal legal act, not a form you mail in.

The process requires appearing **in person at a U.S. embassy or consulate**, completing interviews with a consular officer, and taking a formal oath of renunciation under Section 349(a)(5) of the Immigration and Nationality Act.

The cost recently dropped sharply. The State Department had charged **$2,350** since 2015—among the highest such fees in the world—but cut it to **$450** under a final rule that took effect in April 2026, restoring the level charged from 2010 to 2014 ([CNN, State Department slashes fee to renounce U.S. citizenship](https://www.cnn.com/2026/03/16/travel/renouncing-us-citizenship-fee-cut)).

The larger cost can be the **exit tax**. Under IRC Section 877A, a "covered expatriate" is treated as if they sold all worldwide assets at fair market value the day before expatriating. You are a covered expatriate if any of these apply ([IRS, Expatriation Tax](https://www.irs.gov/individuals/international-taxpayers/expatriation-tax); [IRS, Instructions for Form 8854](https://www.irs.gov/instructions/i8854)):

• Your **net worth is $2 million or more** on the expatriation date;
• Your **average annual net income tax for the prior 5 years exceeds $206,000** (2025 figure); or
• You fail to certify 5 years of federal tax compliance on Form 8854.

For 2025, covered expatriates can exclude **$890,000** of the deemed net capital gain before the exit tax applies. Renouncing also ends your right to live and work in the United States and can affect future visa eligibility—it is irreversible and warrants professional advice before you act.

Practical Takeaways

• **Confirm your second citizenship won't trigger U.S. loss of nationality—it generally won't.** Naturalizing abroad does not endanger your U.S. passport, thanks to the 1990 administrative presumption of intent to retain.
• **Keep filing U.S. taxes every year**, even if you owe nothing. File Form 1040, elect the Foreign Earned Income Exclusion on Form 2555 if you qualify, and use the Foreign Tax Credit to avoid double taxation.
• **Track the $10,000 FBAR threshold across all foreign accounts combined.** File FinCEN Form 114 by April 15 (auto-extended to October 15) if you cross it even briefly.
• **Always enter and leave the United States on your U.S. passport.** Carry both if you travel between your two countries.
• **Check your second country's obligations** before naturalizing—military service, tax residency, and inheritance rules vary widely.
• **Run the renunciation math carefully.** The fee is now $450, but the exit tax can dwarf it if your net worth hits $2 million.

Conclusion and Next Steps

For most American expats, dual citizenship is a net gain: it unlocks residence, work, property, and services that a single passport cannot, while U.S. law protects your right to keep both. The catch is paperwork, not prohibition—citizenship-based taxation means a second passport adds rights without subtracting obligations.

If you are weighing a second citizenship, start by reading the State Department's official guidance on dual nationality and confirm your prospective country's duties for its citizens. Before your first tax season abroad, consult a cross-border tax professional to set up FEIE, Foreign Tax Credit, and FBAR/FATCA compliance correctly from year one—catching up later is far more expensive than doing it right the first time. Only if the ongoing burden clearly outweighs the benefits should renunciation enter the conversation, and never without specialized tax counsel given the exit-tax exposure.

*This article is general information, not legal or tax advice. Consult a qualified cross-border attorney or tax professional about your specific situation.*