Four years in, deciding whether to stay

Who

An Australian couple in their early forties who moved to the U.S. about four years ago and hold green cards. He is a chemical engineer with a multinational manufacturer; she works as a contractor to the U.S. government. Both have PhDs. They have two sons, one in middle school and one in high school. They kept their former home in Australia and rent it out; it is worth about US$1 million.

They are not of one mind about where to live. He likes life in the U.S., even with his family back in Australia. She enjoys it too, but misses home and wants to be closer to family, and she knows they could not earn the same income in Australia. The younger son is the more Americanized of the two, and neither parent knows yet whether the boys will want to go to college in the U.S. or go back.

What they came in with

• A worry she had read about: the U.S. exit tax. Green card holders who have held that status in at least 8 of the last 15 tax years are "long-term residents," and a long-term resident who gives up a green card is a covered expatriate if their net worth is $2 million or more, their average annual net income tax for the prior five years is above the threshold ($211,000 for 2026), or they can't certify five years of tax compliance. Four years in, that clock was running.
• No idea what the exit tax would actually amount to for them. It treats worldwide assets as sold the day before expatriation, with an exclusion amount, and the Australian home and their U.S. accounts would all be in that calculation.
• A real question about whether to keep funding U.S. tax-advantaged accounts. A 401(k) match is hard to turn down, but what happens to a 401(k), a Roth IRA or a 529 if the family ends up in Australia?
• A rented-out home in Australia, with rental income reported in both countries and a future sale that each country would look at differently.
• Australian wills only, and no U.S. estate documents.

What we did

• Modeled the exit tax. We built a detailed calculation of what the exit tax would look like if they gave up their green cards after crossing the eight-year line and met a covered expatriate test, including the deemed sale of the Australian home and the U.S. accounts, the exclusion amount, and how deferred compensation and retirement accounts are treated differently from other assets. We then compared that with the alternative: deciding before the eighth year, when giving up the green cards would not trigger the regime at all.
• Put the decision on a calendar. The important output was not one number but a timeline: how many tax years of green card status they had used, when the eighth year would begin, and what would have to be true about their net worth and tax liability in those years for the tests to bite. That turned a vague worry into a dated decision.
• U.S. accounts if they might leave. We walked through the pros and cons of each account type under both outcomes. Pre-tax 401(k) contributions and the employer match make sense in either case, with attention to how Australia would tax withdrawals later. A Roth IRA's tax-free status is a U.S. concept that Australia does not recognize, so its value depends on staying. A 529 can pay for study at a foreign university only if the school is on the U.S. federal student aid list, which matters if the boys go back for college. See the U.S.–Australia cross-border guide.
• The Australian home. We laid out how the rental income flows onto both returns, how the foreign tax credit works, and what a future sale would look like from the U.S. side, so the decision to keep or sell it is made with both countries' rules in view.
• College, two ways. Education funding was planned so that it works whether the boys study in the U.S. or in Australia, rather than locking the family into one answer before the boys have made theirs. See the college planning guide.
• Estate documents. We referred the couple to a U.S. estate attorney for wills, powers of attorney and health care directives that work alongside their Australian wills, and reviewed beneficiary designations on the U.S. accounts.

Implementation ran about 10 hours: getting the estate attorney engaged and the documents signed, and building and refining the exit tax calculation as their numbers were finalized.

Outcome

• A worked exit tax estimate under each timing, so the couple knows what staying past the eighth year could cost if they later leave, and what deciding earlier would avoid.
• A dated decision framework tied to the eight-year clock, rather than an open-ended worry.
• A deliberate account strategy: which U.S. accounts to fund regardless of where they end up, and which only make sense if they stay.
• U.S. estate documents in place for the first time, coordinated with their Australian wills.

What it cost

See the fee summary at the top of this page. Mercer Street does not prepare the U.S. or Australian returns and does not manage the couple's investments.