If you're living overseas and being taxed by two countries for doing so, which one are you going to drop?

Increasingly, and with no sentimentality, U.S. expats are severing ties with their home country and renouncing citizenship. Last year, 4,279 U.S. citizens ended their long-term U.S. residency, according to the Treasury Department. That's up 25.3% from the 3,415 individuals who shed their U.S. citizenship in 2014 and just adds to the 10,693 total who dropped their citizenship between 2013 and 2015. That's more than the 10,189 who did the same between 1998 and 2012.

The U.K.-based deVere Group of financial advisors estimates that there are 8 million U.S. citizens living abroad, making the number who revoke their citizenship still relatively small. Nigel Green, deVere Group chief executive and founder, blames the Foreign Account Tax Compliance Act (FATCA) for sudden spike in denounced citizenship. Passed in 2010 as a means of cracking down on tax dodgers, FATCA implemented rigid reporting rules for overseas banks and investment firms that hold the assets of U.S. citizens. It also imposes similarly strict rules on U.S. citizens who hold money in foreign accounts. Because the more underhanded elements of U.S. business made a habit of using accounts in Switzerland, the Cayman Islands and elsewhere to shield taxable income from the U.S. government, FATCA uses huge penalties to drop the hammer on those who won't comply.

As the non-partisan Tax Foundation notes, those penalties pushed foreign banks to avoid U.S. clients altogether. While that takes away a number of tax shelters, it also catches a lot of innocent citizens abroad in the middle.

“This highly controversial piece of legislation has had the unintended consequence of turning millions of hard-working, law-abiding Americans based outside the States into financial pariahs,” deVere's Green says. “Foreign financial institutions now routinely refuse to handle American clients – even if they have been clients for years – as it is too much trouble and too costly to comply with FATCA’s onerous rules.”

If you think it's an incredible coincidence that FATCA and a jump and renounced citizenships just happened to take place at the same time, the numbers say otherwise. The Tax Foundation points out that after FATCA was passed in early 2010, the number of Americans that renounced their citizenship doubled, from 742 to 1,534. When the final batch of FATCA regulations were issued 2013, renounced citizenship tripled, from 932 to 2,999. FATCA’s penalties on banks took effect in mid-2014, and 6,119 Americans have renounced their citizenship since. That's more than the number who did so from 2000 to 2009.

A little over 16 months ago, soon after FATCA’s implementation, a deVere Group survey found that 73% of American expatriates were considering relinquishing their U.S. passports as a direct result of the law.

“With three out of four expats finding some part of personal finances more complex, the expat life clearly brings with it personal benefits as well as many complications, often times from unfamiliar financial regulations and tax obligations,” said Jacques Herman, head of international retail banking and wealth management for HSBC Bank USA.

As a result, those who come from other countries to live or work as expats in the U.S. have a far easier time of it than their U.S. counterparts abroad. According to HSBC, almost half (45%) of expats moving to the United States rank finances as their most important consideration: especially the 39% who earn more than $101,000 per year here. Although the cost of living is generally higher here, 59% of expats here reported they had more disposable income. That money is going toward significant investments, with 53% reporting that they can now afford to own one or more properties, while 48% can now afford a nicer car.

By contrast, less than one-third (30%) of Americans living abroad are motivated by finances, and their paychecks back that up. Roughly 45% make less than $60,000 per year, while less than one-third (27%) make more than $101,000. However, the 48% of U.S. expats who say they have more disposable income have spent it on domestic help (38%) and luxurious holidays (35%). Less than one-quarter (24%) can now afford to own one or more properties.

Also, giving up on U.S. citizenship doesn't necessarily mean you're done paying, either. On your way out, you have to prove five years of U.S. tax compliance. If you're wealthy and have a net worth greater than $2 million or average annual net income tax for the 5 previous years of $157,000 or more for 2014 , you'll pay an exit tax. If you aren't wealthy, you'll still have to pay a fee for renouncing your citizenship. That fee just jumped jumped from $450 to $2,350 in 2014. If you think that sounds exorbitant, fees that are about 20 times lower in other developed nations say you're right.

However, Green notes that many Americans abroad are proud of their citizenship and consider it an integral part of their identity when living overseas. He says giving up citizenship is a distressing idea for many of his U.S.-citizen clients and something they wouldn’t do unless they felt there was no alternative. While that's the case for many U.S. expats, Green notes that there are other options worth considering.


“There are several well-established, bona fide, compliant ways that U.S. expats can mitigate the often unbearable burden of FATCA... [including] an additional overseas pension contract that’s specifically designed for U.S. taxpayers with assets in their country of residence,” Green says. “Don’t feel forced by Uncle Sam to give up your citizenship until all the options have been fully explored."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.