The short answer
If you are a US citizen, very little changes: you are still taxed on worldwide income, the deferred gain stays in the replacement's basis until you sell, and you are not a foreign seller for FIRPTA. If you are a green-card holder and give up US residence, three things change. A long-term resident who is a covered expatriate is treated as selling everything the day before leaving, deferred gain included. As a nonresident, rent from the property is subject to 30% withholding on the gross amount unless you elect net taxation. And the buyer of the property will withhold 15% of the price when you eventually sell.
At a glance
| Citizen abroad | Same filing rules; worldwide income; deferred gain untouched |
|---|---|
| Return due date abroad | Automatic extension to June 15; October 15 with Form 4868 |
| Card holder leaving | Exit tax only for long-term residents who are covered expatriates |
| 2026 exit tax figures | Income tax test over $211,000; net worth $2 million; $910,000 excluded |
| Nonresident rent | 30% of gross unless the section 871(d) net-basis election is made |
| Nonresident sale | Buyer withholds 15% of the price; another 1031 still possible |
| States | Some track deferred gain after you leave, such as California's FTB 3840 |
For a citizen, the exchange and the deferred gain stay exactly where they were
The IRS page for citizens and residents abroad says the filing rules "are generally the same whether you are in the United States or abroad" and that you remain "subject to tax on worldwide income from all sources." Moving is not a disposition, so it does not touch the gain deferred into your replacement.
Two things do shift. Living abroad on the regular due date gives you an automatic two-month extension to June 15, and Form 4868 carries it to October 15, which matters if you start another exchange late in a year (keeping the full 180 days). And every future replacement must still be in the United States under section 1031(h), as covered on exchanging while living abroad.
A citizen who renounces citizenship is an expatriate under section 877A(g)(2), so the exit tax described below applies to renunciation as well as to giving up a green card.
A green-card holder who gives up residence may face a deemed sale
Section 877A treats all property of a covered expatriate as sold for fair market value on the day before the expatriation date. For a former card holder it applies only to a long-term resident, someone who held the card in at least 8 of the last 15 tax years under section 877(e)(2).
For 2026, Rev. Proc. 2025-32 sets the income tax test at more than $211,000 of average annual net income tax and the exclusion at $910,000; a net worth of $2 million or more, or failing to certify five years of compliance on Form 8854, also makes you covered. A replacement property's built-in gain, including everything deferred into it, counts in the deemed sale. The full comparison is on green-card holders and 1031 exchanges.
As a nonresident, rent and the eventual sale are taxed on different terms
Section 871(a) imposes a 30% tax on rents a nonresident alien receives from US sources, and section 1441(a) makes the person paying them, including a property manager or a trust, withhold it. The 30% applies to gross rent, with no deduction for depreciation, interest or repairs.
Section 871(d) lets you elect to treat income from US real property held for the production of income as effectively connected, so it is taxed on a net basis at graduated rates on Form 1040-NR. The election stays in effect for all later years unless the IRS consents to revoke it.
When you sell, section 1445 requires the buyer to withhold 15% of the amount realized. Another exchange is still available to a foreign owner, using a withholding certificate application, as explained on FIRPTA in a 1031.
Hypothetical: a former card holder's $100,000 of rent
A card holder of six years moves abroad and surrenders the card. Because the holder is not a long-term resident, there is no deemed sale. The replacement rental earns $100,000 of gross rent with $70,000 of expenses, interest and depreciation. All figures are hypothetical; run your own with a CPA who files Form 1040-NR.
- No election: the manager withholds $30,000, 30% of the gross, and that is the tax.
- Section 871(d) election: the $30,000 of net income is taxed at graduated rates, and expenses and depreciation count.
- A later $1,500,000 sale: the buyer withholds $225,000 unless a certificate application is in by closing, and the gain, old and new, is taxed as effectively connected income.
States can follow the deferred gain after you leave
State residency ends on its own terms, and some states keep a claim on gain deferred from property inside their borders. California requires taxpayers who exchange California property for property outside the state to file Form FTB 3840 every year, according to the FTB 3840 instructions. Other states differ, as covered on whether a 1031 defers state tax.
Before you move, settle these with your CPA
- Count your green-card years and test the covered expatriate thresholds before you surrender the card.
- Decide whether to make the section 871(d) election with your first nonresident return.
- Give your property manager, or any DST sponsor you hold through, your new tax status forms so withholding is right from the first payment.
- Ask an adviser in your new country whether it taxes the deferred gain or the rent, because US deferral does not bind another country.
- If you hold a DST interest, the withholding and estate issues for nonresidents are on foreign investors and DSTs.
Related questions
Does moving abroad as a citizen trigger tax on my deferred gain?
No. A move is not a sale. The deferred gain is taxed when the replacement is sold in a taxable transaction, and the exit tax applies only if you renounce citizenship and are a covered expatriate.
Can I do another 1031 exchange from overseas?
Yes, as long as the replacement is US real property. Citizens and residents use the ordinary rules; a nonresident must also handle FIRPTA withholding with a certificate application.
When is my US return due once I live abroad?
June 15 automatically if you live and work outside the United States and Puerto Rico on April 15, and October 15 with Form 4868. That later due date can lengthen the exchange period for a late-year sale.
Will my new country tax the gain I deferred?
It may. Many countries tax residents on worldwide income and do not recognise a US 1031, so ask a local adviser before you sell the replacement.
I hold DST interests. What changes for the trust's distributions?
If you become a nonresident alien, the trust or its paying agent becomes your withholding agent for US-source rent. Expect a request for new tax forms and 30% withholding unless you elect net-basis taxation.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.
- IRS, U.S. citizens and resident aliens abroad
- 26 U.S.C. section 877A, tax responsibilities of expatriation
- 26 U.S.C. section 877(a)(2) and (e)(2)
- Rev. Proc. 2025-32, sections 4.37 and 4.38
- 26 U.S.C. section 871(a) and (d), nonresident aliens and the real property election
- 26 U.S.C. section 1441, withholding on nonresident aliens
- 26 U.S.C. section 1445, FIRPTA withholding
- California Franchise Tax Board, 2025 Instructions for Form FTB 3840
- IRS, Expatriation tax