Do Green-Card-Holder Olim Owe a US Exit Tax After Aliyah?
Possibly, and this is the cross-border surprise that catches green-card holders, not US citizens. If you held a US green card in at least 8 of the last 15 tax years and then abandon it (Form I-407) or claim Israeli residence under the US-Israel tax treaty, the US can treat you as expatriating and apply the section 877A mark-to-market exit tax1. The move to Israel, plus the Israeli apartment you buy, is exactly what pulls the trigger. A US citizen who keeps citizenship is never exposed this way.
Not advice
Almost every new oleh on a green card assumes that handing the card back is a clean, paperwork-only exit from the US tax system. For most people it is. But for a long-term residentwhose net worth has crept over a fixed dollar line, that same I-407 is a taxable event: the IRS pretends you sold everything you own the day before you leave and taxes the built-in gain. In the US you would never face this just by relocating; in the green-card-holder's case, relocating is the act that creates the liability.
Who Is a "Long-Term Resident" Exposed to the Exit Tax?
You are a long-term resident (LTR) if you held a US green card (lawful permanent resident status) in at least 8 of the last 15 tax years ending with the year you stop being treated as a permanent resident2. Only LTRs are inside the expatriation rules at all. If you held your green card for, say, four years before aliyah, abandoning it is simply not an expatriation event and none of this applies to you.
The 8-of-15 count is mechanical and easy to undercount. A year in which you held the card for any part counts as a full year, so the eighth year arrives sooner than people expect. Plenty of olim who lived in the US for a decade on a green card before deciding to move are LTRs without realizing the label even exists. The label matters because it is the gateway: no LTR status, no exit tax.
What Act Counts as "Expatriating" for a Green-Card Holder?
For an LTR, expatriation happens on the date your green card is abandoned or revoked, typically the day you file Form I-407 to surrender it, or the date you commence to be treated as a resident of Israel under the US-Israel tax treaty and notify the IRS1. The second route catches people who never formally hand the card back but break US residence by treaty. Either way the date is then frozen, and the exit-tax calculation runs against your assets the day before that date.
What Makes You a "Covered Expatriate" Who Actually Owes the Tax?
Being an LTR who expatriates is not enough to owe the tax. You owe it only if you are a covered expatriate, which means you trip any one of three tests1. Clear all three and you expatriate cleanly with no exit-tax charge, even as a long-term green-card holder.
| Covered-expatriate test | The trip-wire | Why olim hit it |
|---|---|---|
| Net-worth test | Net worth of $2 million or more on the expatriation date1 | An Israeli apartment plus US/Israeli retirement balances clears it easily, this is the test most olim trip on |
| Net-income-tax test | Average annual US net income tax over the prior 5 years above $206,000 (2025 figure, inflation-adjusted)2 | High earners cross it; this is a tax-paid figure, not income |
| Certification test | Failure to certify 5 years of full US tax compliance on Form 885413 | Anyone behind on FBARs or returns flunks this regardless of wealth, the silent trap |
Note the asymmetry of the third test: you can be a modest-net-worth oleh well under $2 million and still be a covered expatriate purely because you cannot honestly certify 5 clean years of US filings on Form 88541. Getting current first, late returns, FBARs, FATCA forms, is what keeps the certification test from converting an otherwise-clean exit into a taxable one.
How Does the Mark-to-Market "Deemed Sale" Actually Work?
If you are a covered expatriate, IRC §877A treats all of your worldwide property as sold at fair market value on the day before your expatriation date, and the net gain is taxed as if you had really sold it1. This is a one-time event, not an annual charge. The first slice of that net gain is excluded: for 2025 the exclusion is $890,000, adjusted for inflation each year2. Only gain above that exclusion is taxed.
The mark-to-market regime applies to anyone who expatriated after June 16, 20081. Because the deemed sale is measured against your original cost basis in each asset, long-held US brokerage positions with decades of appreciation can throw off a large deemed gain even though you never received a shekel of cash to pay the tax with. That cash-flow gap, tax due on a sale that never happened, is the part that blindsides people.
Why Does Buying an Israeli Apartment Trip the Net-Worth Test?
Because the net-worth test counts your worldwide assets, and an Israeli home is a large worldwide asset. A single Tel Aviv, Jerusalem, or central-region apartment can be worth well over a million dollars on its own; add a US 401(k) or IRA, an Israeli pension once it builds, and ordinary savings, and a long-term green-card holder crosses the $2 million line that defines the net-worth test1. The very purchase that makes aliyah feel permanent is often what converts an LTR into a covered expatriate.
This is the pure cross-border mechanism: the trigger is the move plus the Israeli assets you acquire, not anything you did wrong. You pay Israeli מס רכישה (Mas Rechisha) (purchase tax) on the apartment under Israeli law, and separately that same apartment swells the US net-worth figure that the exit-tax test reads. Two unrelated tax systems both look at the one purchase. The timing question, whether to abandon the green card before or after buying, and before or after the deemed gain builds, is precisely what a cross-border adviser models.
How Is Abandoning a Green Card Different From Renouncing Citizenship?
They are different acts that run through the same §877A machinery, and that is the single most useful distinction for an oleh to hold onto1. A green-card holder expatriates by giving up the card (or by treaty); a citizen expatriates only by formally renouncing US citizenship before a consular officer. Keep your green card and you do not expatriate; keep your citizenship and you do not expatriate. The exit tax never fires from the act of moving alone.
| Green-card holder (LTR) | US citizen | |
|---|---|---|
| What is the expatriating act? | Abandoning the card (Form I-407) or claiming treaty residence in Israel1 | Formally renouncing citizenship at a US consulate |
| Does simply moving to Israel trigger it? | No, but the LTR who later abandons the card can be caught | No, citizenship and worldwide filing continue indefinitely |
| Same three covered-expatriate tests? | Yes, net worth, net-income-tax, certification1 | Yes, identical tests1 |
| If you do nothing? | Keep the card: no exit tax, but you stay a US tax resident filing worldwide | Keep citizenship: no exit tax, but worldwide filing, FBAR and FATCA forever |
What Is the "Dual-Status Year" in the Year You Expatriate?
The year you expatriate is usually a dual-status year: you are a US tax resident for the part of the year before your expatriation date and a non-resident for the part after1. You file as a US resident on worldwide income up to the expatriation date, then only on US-source income afterward, and you attach Form 8854 to report the expatriation and (if covered) the deemed sale13. The split is why your expatriation date is not a trivia point, it sets which income falls on which side of the line.
Because the deemed gain and the rest of that year's income land in the same tax year, the dual-status return can stack a one-time mark-to-market gain on top of ordinary income, pushing the whole picture into higher brackets. Sequencing the expatriation date against income realized that year is a core planning lever, and another reason to file Form 8854 with professional help rather than freehand.
One scope note: this article deliberately does not turn on any pooled fund. If your assets include non-US ETFs, mutual funds, or an Israeli מס הכנסה (mas hachnasa)-wrapped savings vehicle, those carry their own separate PFIC problem for US persons (Form 8621, punitive §1291) entirely apart from the exit tax; see the PFIC article on this site.
Quick check
A green-card holder who held the card for 9 of the last 15 years makes aliyah, buys an apartment worth $1.3 million, has a $900,000 retirement balance, and then files Form I-407. Are they likely a covered expatriate?
The US exit tax (IRC section 877A) can hit green-card-holder olim, but not US citizens who simply move. You are exposed only if you are a long-term resident, meaning you held a US green card in at least 8 of the last 15 tax years, and you then abandon the card (Form I-407) or claim Israeli residence under the US-Israel tax treaty. Even then you owe tax only if you are a covered expatriate, which means tripping any one of three tests: net worth of $2 million or more, average annual US net income tax above $206,000 (2025 figure), or failure to certify 5 years of US tax compliance on Form 8854. The net-worth test is the one most olim trip on, because a central-region Israeli apartment plus US or Israeli retirement savings easily clears $2 million. If you are a covered expatriate, section 877A treats all your worldwide property as sold at fair market value the day before you expatriate, taxing the net gain above an exclusion ($890,000 for 2025). A US citizen who keeps citizenship never expatriates and never faces this; the citizen version of the same rules fires only on formal renunciation.
Only if you are both a long-term resident, meaning you held a green card in at least 8 of the last 15 tax years, and a covered expatriate, meaning you trip the $2 million net-worth test, the $206,000 (2025) average net-income-tax test, or the Form 8854 certification test. Clear all three and abandoning the card carries no exit-tax charge, even as a long-term resident.
It often does. The net-worth test counts your worldwide assets, and a central-region Israeli apartment plus retirement savings commonly exceeds the $2 million line on its own. The very purchase that makes aliyah feel permanent is frequently what turns a long-term green-card holder into a covered expatriate.
Not from moving. A US citizen who keeps citizenship never expatriates and never faces the exit tax, because the citizen version of section 877A only fires on formal renunciation before a consular officer. You continue worldwide filing, FBAR, and FATCA indefinitely, but the deemed-sale exit tax does not apply while you remain a citizen.
Form 8854 is the Initial and Annual Expatriation Statement. You file it for the tax year you expatriate, attached to your return, to report the expatriation, certify 5 years of US tax compliance, and (if you are a covered expatriate) report the section 877A deemed sale. Failing to file or certify makes you a covered expatriate regardless of your wealth.
Israel has a separate exit-tax concept that applies when an Israeli tax resident leaves Israel, not when you arrive, so it is generally not what a new oleh faces on aliyah. Israel also levies no estate or inheritance tax. The US section 877A exit tax is a distinct, US-side charge tied to your green-card status, and the two regimes are assessed independently.
You avoid the exit tax, because you have not expatriated, but you stay a US tax resident filing on worldwide income with FBAR and FATCA obligations. Keeping the card also risks it lapsing for immigration purposes if you live abroad long-term. Whether to keep or surrender is a combined tax-and-immigration decision worth professional input.
Pre-expatriation planning exists, but it is technical and anti-abuse rules apply, so it is not a do-it-yourself exercise. The net-worth test is measured on the expatriation date against worldwide assets, and the certification test still has to be met independently. Model any restructuring with a cross-border specialist well before you file Form I-407.
