Here’s why it ‘doesn’t make financial sense’ for Americans living abroad to give up their U.S. citizenship, one expert says

Americans who move abroad still have a responsibility to file their taxes with the IRS, sometimes in addition to taxes paid in their place of residence. Unsurprisingly, the thought of renouncing their U.S. citizenship may have crossed their minds at least once.

However, experts advise against the move.

“It typically doesn’t make financial sense, and there’s a few reasons why,” said Italy-based Alex Ingrim, a financial advisor at Chase Buchanan Wealth Management.

While there may be some instances where “the pain of being American” arises in the tax liability, “you’re very rarely double-taxed” as an American, Ingrim said.

Additionally, citizenship renunciation is not an easy process and can be difficult to backtrack on if you change your mind, said certified financial planner Jude Boudreaux, a partner and senior financial planner at The Planning Center in New Orleans.

Therefore, taxpayers looking to move abroad in the coming year may need to plan ahead of time to figure out what their tax residency will look like.

Before you move abroad, make sure what your income situation will be: whether you will be working or will depend on retirement savings.

“The U.S. and the country [of residence] might have an income tax treaty, it might have an estate tax treaty [or] it might have a normalization agreement, which deals with retirement income like Social Security,” said Boudreaux, a CNBC FA Council member. “It all depends on the different rules.”

To that point, some European countries, such as Portugal, tax retirees’ streams of income, so expats’ tax liability under the double taxation agreement is to the foreign country where they reside and not the U.S., Ingrim said.

Under such an agreement, those filing U.S. tax returns can use the credit from what was paid in the other country to extinguish…