CLIENT ADVISORY

A planning overview, with country sections for Canada, Costa Rica, Ireland, Colombia, and Spain

Jessica Irving Marschall, CPA June 4^th, 2026

Why this conversation is happening now

US clients are increasingly asking what it would take to live, work, and possibly hold citizenship in another country. Some are responding to political and economic uncertainty, some are following work or family, and some have simply decided that a second residence, and sometimes a second passport, is worth pursuing. Whatever the motivation, the conversation almost always moves from immigration mechanics to the question that matters most to us as advisors: what does this mean for your US tax position?

The starting point is the same regardless of destination. The United States taxes its citizens and lawful permanent residents on worldwide income no matter where they live. A move abroad does not end US filing. It layers a second tax system on top of the US one, along with a set of foreign-account reporting rules that drive most of the compliance work. This advisory first covers the US tax framework that applies to every American abroad, then walks through five destinations our clients have asked about most often in the past six months.

Part 1: The US tax position for every American abroad

Three points control most of what we tell clients before they ever choose a country.

Citizenship-based taxation

The United States taxes its citizens and lawful permanent residents on worldwide income regardless of where they live. Filing a Form 1040 each year is mandatory for as long as US citizenship or green card status is held. Establishing residence abroad does not change this, and it does not by itself reduce the US filing burden.

Treaty relief and credits

Three tools eliminate double taxation in the great majority of cases. The Foreign Earned Income Exclusion (Form 2555) lets qualifying taxpayers exclude up $130,000 for 2025 and is adjusted annually for inflation.. The Foreign Tax Credit (Form 1116) offsets US tax dollar for dollar with income taxes paid to the host country. An applicable income tax treaty can allocate taxing rights and provide tie-breaker rules. Where the host country taxes earned income at rates higher than the US, many clients owe little or no net US tax on that income. Where the host country does not tax foreign income at all, there is little or no foreign tax to credit, and the US tax can remain in full.

Information reporting

Reporting, not the income tax itself, drives most of the compliance burden for US persons abroad. The FBAR (FinCEN Form 114) is required when aggregate foreign financial accounts exceed 10,000 dollars at any point in the year. Form 8938 (FATCA) applies above higher, residence-based thresholds. Foreign retirement accounts, foreign mutual funds and ETFs treated as passive foreign investment companies (PFICs), and interests in foreign corporations, partnerships, or trusts each carry their own forms and penalties. These obligations apply regardless of whether any US tax is owed.

Catching up before any planning

A client who has fallen behind on US filings while abroad is not necessarily in serious trouble. The IRS Streamlined Filing Compliance Procedures allow non-willful filers to catch up on three years of returns and six years of FBARs without late-filing or FBAR penalties, provided eligibility is met. We generally clean up compliance before any expatriation conversation, because, as noted below, a single uncertified year converts a client into a covered expatriate.

The US exit tax for clients who renounce

Most clients who move abroad keep their US passport. Some decide the ongoing filing burden, or personal and political considerations, outweigh the benefits of citizenship. Before any client signs the renunciation paperwork at a US consulate (a 2,350 dollar State Department fee), the section 877A exit tax analysis is the controlling conversation. The exit tax does not apply to everyone who gives up citizenship. It applies to covered expatriates, defined as citizens who renounce and long-term residents (green card holders for at least eight of the prior fifteen tax years) who terminate residency, and who meet any one of three tests.

Test	Threshold (year of expatriation)	What it measures
Net worth test	2 million dollars or more (not indexed)	Worldwide net worth on the expatriation date, including foreign real estate, business interests, and assets held through entities.
Average tax liability test	More than 206,000 dollars (2025); 211,000 dollars (2026); indexed annually	Average annual net US income tax liability for the five years ending before expatriation. This is liability after credits, not gross income or balance due.
Compliance certification test	Five years	The client must certify on Form 8854, under penalty of perjury, that all US federal tax obligations were met for the five years before expatriation. A single uncertified year converts the client to covered status regardless of net worth.

A covered expatriate is treated as if all worldwide property were sold at fair market value on the day before expatriation, the section 877A mark-to-market regime. The net unrealized gain is reduced, not below zero, by an inflation-indexed exclusion of 890,000 dollars for 2025 and 910,000 dollars for 2026. Gain above the exclusion is generally taxed under applicable capital gain rules. Depending on the taxpayer’s circumstances, additional taxes such as the Net Investment Income Tax may also apply. Tax-deferred accounts such as IRAs are treated as fully distributed, deferred compensation is generally subject to 30 percent withholding when paid, and interests in nongrantor trusts carry their own 30 percent withholding. Form 8854 is the central document, filed with the final return, and a 10,000 dollar penalty applies for a failure to file when required.

For most clients, the right answer is to obtain residence abroad, enjoy dual status if citizenship follows, and continue filing US returns. Renunciation is rarely the cheapest solution, it is irrevocable, and it can carry a meaningful one-time tax bill.

Part 2: The five destinations

Each country below pairs an immigration framework with a local tax system. The interaction with the US rules in Part 1 is what determines a client’s real cost. Two questions matter most for each destination: does the country tax foreign income, and is there a US income tax treaty to fall back on. The table that follows summarizes both, and the sections after it add detail.

Country	Common residency route	US tax treaty	Local tax headline for US persons
Canada	Express Entry, provincial nomination, family sponsorship, descent	Yes	Worldwide income; rates often higher than US, so foreign tax credits frequently zero out US tax
Costa Rica	Pensionado, Rentista, Inversionista, Digital Nomad	No	Territorial; foreign income not taxed locally, so US tax usually remains in full
Ireland	Employment permits, Start-Up Entrepreneur, Stamp 0 for retirees	Yes	Worldwide if domiciled; remittance basis available to non-domiciled residents
Colombia	Migrant (M) visa categories, then Resident (R) visa	No	Worldwide income once tax resident (over 183 days); rates up to 39 percent; no treaty relief
Spain	Non-Lucrative Visa, Digital Nomad Visa	Yes	Worldwide at rates up to roughly 47 percent, or flat 24 percent under the Beckham regime if eligible

Canada

Canada remains the most common destination our clients ask about, helped by proximity, language, and a treaty-rich tax relationship. The immigration system is built around permanent residence (PR), which grants the right to live and work anywhere in Canada indefinitely. Citizenship is a separate, later step.

Residency pathways:

• Express Entry, the federal economic system, typically processed within about six months. It feeds four programs: the Federal Skilled Worker Program, the Canadian Experience Class, the Federal Skilled Trades Program, and the Provincial Nominee Program. Candidates are ranked by their Comprehensive Ranking System score, and invitations go to the highest-ranked profiles in each draw.
• Family sponsorship for a spouse, common-law partner, dependent child, and in some cases parents and grandparents. Spousal sponsorship generally has no financial threshold.
• Regional and provincial routes, including the Atlantic Immigration Program, rural and francophone pilots, and Quebec-selected programs under the Canada-Quebec Accord.
• Some individuals with a Canadian parent, and in limited circumstances other Canadian ancestry, may already qualify for citizenship.
• Work permits as a bridge. Under the Canada-United States-Mexico Agreement, US citizens in qualifying professions can work in Canada without a Labour Market Impact Assessment, and that work often builds toward the Canadian Experience Class.

From residence to citizenship: after PR, an applicant must be physically present for at least 1,095 days (three years) within the prior five years, file Canadian returns where required, pass a citizenship test, and demonstrate English or French. The earliest a client can hold Canadian citizenship is roughly three years after landing as a PR.

US tax interaction: The US-Canada treaty applies, and Canadian rates on earned income are generally higher than US rates, so the Foreign Tax Credit frequently reduces net US tax to zero. The compliance traps are on the reporting side. Canadian registered accounts such as the TFSA and RESP may require additional US reporting and often present complex US tax compliance considerations. We coordinate these before a client opens Canadian accounts, not after.

Costa Rica

Costa Rica is a favorite among retirees and remote workers, with a lower cost of living and well-worn residency programs. And it is in the US CST time zone so it works well for remote American business owners and employees. Its tax system is the key feature for US clients: Costa Rica taxes on a territorial basis, so income earned outside the country is generally not taxed locally.

Residency pathways:

• Pensionado, for retirees with a guaranteed pension of at least 1,000 dollars per month.
• Rentista, for those who show stable income of about 2,500 dollars per month or place a qualifying deposit (commonly cited near 60,000 dollars) with a Costa Rican bank.
• Inversionista, for an investment of at least 150,000 dollars in real estate or a business.
• Digital Nomad (Estancia para Trabajadores Remotos), for remote workers showing roughly 3,000 dollars per month (4,000 dollars for a family) subject to current immigration regulations and this often changes. It grants a one-year stay, renewable once, but does not lead to permanent residency.

From residence to citizenship: Generally, temporary residents may become eligible for permanent residence after approximately three years, subject to maintaining residency requirements applicable to their visa category.

US tax interaction: There is no US-Costa Rica income tax treaty. Because Costa Rica does not tax foreign income, there is little local tax to credit, so a client’s US worldwide tax obligation usually remains in full. The Foreign Earned Income Exclusion can still shelter earned income for those who qualify, but passive income stays fully US-taxable, and self-employed clients have no totalization agreement to relieve US self-employment tax. The absence of a treaty also means no tie-breaker rules and no reduced treaty withholding, which raises the value of careful Foreign Tax Credit and timing planning.

Ireland

Ireland appeals to clients who want an English-speaking base inside the European Union, and its domicile rules create a genuine planning opportunity. The former Immigrant Investor Programme (the Irish golden visa) closed to new applicants in February 2023, so most clients now arrive through work or independent-means routes.

Residency pathways:

• Employment permits, including the Critical Skills Employment Permit, which can shorten the road to long-term residence.
• The Start-Up Entrepreneur Programme (STEP) for founders of an innovative, scalable business with qualifying secured funding.
• Stamp 0 for retirees and persons of independent means who can show sufficient income and private medical insurance. Stamp 0 is renewable but is not reckonable toward citizenship.
• Family routes for those joining an Irish or EEA family member.

From residence to citizenship: naturalization generally requires five years of reckonable residence within the previous nine years (1,826 days total), including one continuous year immediately before applying. Time on Stamp 0 does not count.

US tax interaction: The US-Ireland treaty applies. Irish residents who are also Irish-domiciled are taxed on worldwide income at rates of 20 and 40 percent, plus the Universal Social Charge and PRSI. The valuable feature for most American arrivals is the remittance basis: a resident who is not Irish-domiciled is taxed on many foreign income and gain items are taxed only when remitted to Ireland. A US client who intends to return home is usually US-domiciled and can claim it, though a deemed remittance charge can apply to long-term non-domiciled residents with high foreign income. As with all treaties, the US savings clause means US citizens are still taxed on worldwide income, so the treaty coordinates but does not remove US filing.

Colombia

Colombia draws clients with its cost of living and its cities, but it carries the sharpest tax trap on this list. Residency itself is straightforward; the hazard is accidental tax residency.

Residency pathways:

• Migrant (M) visa categories, including pension or retirement income, rentista (passive income), investor, and digital nomad routes. The digital nomad category is built for income earned from outside Colombia and does not authorize local work.
• Resident (R) visa, generally available after holding an M visa for a qualifying period, which is the step toward permanence.

From residence to citizenship: naturalization typically follows about five years of continuous residence, with a shorter track for those married to a Colombian national or with a Colombian child, and a Spanish and civics demonstration.

US tax interaction: There is no US-Colombia income tax treaty. Colombia treats a foreigner as a tax resident once they spend 183 days or more, and a tax resident is taxed on worldwide income at progressive rates up to 39 percent. Many clients deliberately structure stays under the 183-day threshold to stay non-resident and limit Colombian tax to Colombian-source income. For those who do become residents, the lack of a treaty removes tie-breaker protection and reduced withholding, so the Foreign Tax Credit is the primary defense against double taxation and day-counting becomes a planning discipline, not an afterthought.

Spain

Spain is popular for lifestyle and climate, and it offers a special regime that can sharply reduce tax for the right profile. The investor golden visa closed to new applicants on April 3, 2025, so the two live routes for non-EU nationals are now the Non-Lucrative Visa and the Digital Nomad Visa.

Residency pathways:

• Non-Lucrative Visa, for retirees and others who can show sufficient passive income or savings and who will not work locally. Holders become full Spanish tax residents.
• Digital Nomad Visa (the international telework authorization), for remote workers and certain freelancers earning from outside Spain, with a 2026 income threshold of roughly 2,760 to 3,024 euros per month depending on the source.
• Entrepreneur and family routes round out the options. Property purchase no longer grants residency on its own but can support an application.

From residence to citizenship: naturalization for US nationals generally requires ten years of legal residence (the two-year fast track is reserved for nationals of Ibero-American countries and a few others), so Spain is a long road to a passport for Americans.

US tax interaction: The US-Spain treaty applies. A person who spends more than 183 days in Spain is normally a tax resident taxed on worldwide income under IRPF, with combined rates that can approach 47 percent depending on the region. The planning lever is the special expatriate regime known as the Beckham Law: eligible newcomers are taxed as non-residents, at a flat 24 percent on Spanish-source employment income up to 600,000 euros, with most foreign-source income exempt, for the year of arrival plus five years. Eligibility generally applies to qualifying workers relocating to Spain, including many employees and certain digital nomads, entrepreneurs, and company directors meeting statutory requirements. The treaty includes a reservation clause, so US citizens remain taxable on worldwide income, and the interaction between the Beckham regime and the US return needs to be modeled rather than assumed.

Bottom line for the client conversation

Moving abroad is an immigration project and a tax project at the same time, and the two have to be planned together. The immigration route sets the timeline and the right to stay. The host country’s tax system and its treaty (or lack of one) with the United States set the real cost. Two destinations on this list have no US treaty, Costa Rica and Colombia, which changes the planning entirely: in Costa Rica the territorial system leaves the US tax largely intact, and in Colombia the 183-day residency trigger and worldwide taxation make day-counting a core strategy. The three treaty countries, Canada, Ireland, and Spain, each offer a coordinating mechanism, and Ireland and Spain add genuine regimes (the remittance basis and the Beckham Law) that reward early structuring.

Whether to expatriate is a separate and much higher-stakes decision than where to live. Dual status preserves optionality at the cost of continued US filing and reporting. Renunciation can end that ongoing burden, but it is irrevocable, it can carry a one-time tax bill under section 877A, and it leaves continuing US obligations for any US-source income or US ties. The right answer is client-specific, and in every case the work should start well before the move, not after the accounts are open and the days are already counted.

This advisory is general in nature and reflects rules in effect as of mid-2026. It is not a substitute for individualized tax, immigration, or legal advice. Income thresholds, fees, and visa rules change frequently and vary by source. Please contact our office before making any decision regarding relocation, foreign residency, or US expatriation so we can run the specific numbers for your situation.

Selected sources

• Government of Canada, Live in Canada permanently (immigration programs overview): canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada.html
• CanadaVisa, Canadian Citizenship Eligibility: canadavisa.com/canadian-citizenship-eligibility.html
• IRS, Expatriation tax: irs.gov/individuals/international-taxpayers/expatriation-tax
• IRS, Figuring the foreign earned income exclusion (Form 2555): irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion
• The Tax Adviser, Bidding farewell to US citizenship: Understanding the exit tax (Levy and Patel, Sept. 2024): thetaxadviser.com
• Taxes for Expats, US exit tax 2026 and Costa Rica country guide: taxesforexpats.com
• Fragomen and CostaRicaBoard, Costa Rica visa and digital nomad guidance (2026): fragomen.com; costaricaboard.com
• Coll and Co; Irish Tax Hub, Ireland tax on foreign income and the remittance basis (2026): coll.ie; irishtaxhub.ie
• Total.law, Irish residency for US citizens (2026): total.law/us-to-ie/residency
• ColombiaMove and Citizen Remote, Colombia 183-day tax residency and visa guidance (2026): blog.colombiamove.com; citizenremote.com
• Immigrant Invest; Citizen Remote; Get Golden Visa, Spain Digital Nomad Visa, Non-Lucrative Visa, and Beckham Law (2026): immigrantinvest.com; citizenremote.com