The Residence-Based Taxation for Americans Abroad Act

New bill introduced in the 118^th Session of the House of Representatives by Darin LaHood would create an elective residence-based taxation system.

Representative Darin LaHood (R. IL) has introduced the Residence-Based Taxation for Americans Abroad Act (H.R. 10468) (the “Bill”) that would permit Americans living abroad to elect to become part of a new RBT system, in which the United States would no longer tax their income earned outside the United States. They would remain taxed on non-U.S. source income by their resident country while the United States would continue to tax their U.S. source income (such as Social Security benefits, etc.). If one does not elect RBT, one remains taxed under citizenship-based taxation.

The Bill includes other features in addition to this “election” aspect, such as:

• Electing individuals would thereafter be treated by the Tax Code as “non-resident aliens”; and
• Electing individuals whose net worth, after excluding some assets, would be above a certain threshold, would be required to pay a “Departure Tax.”

The Departure Tax on high net-worth individuals is intended to prevent abuse and to offset revenue loss.

There are also “grandfathering” provisions:

• Americans who have lived overseas 3 of the last 5 years would not pay the Departure Tax; and
• Americans born abroad or born in the U.S. but have lived overseas for a long time or since a young age (so-called “accidental Americans”) would be exempt from the Departure Tax, as well as from past tax non-compliance.

AARO prepared a short Summary of the Bill, which can be found below, as well as a Chart comparing citizenship-based taxation with non-resident alien taxation, to which those who elect RBT under the Bill would be subject.

Summary of RBT Bill/April 6, 2025
Comparison of CBT & NRA/October 1, 2025