Why it doesn't make financial sense for Americans living abroad to renounce U.S. citizenship, expert says.

Americans who move abroad are still required to file their tax returns with the IRS, sometimes in addition to the taxes paid in their country of residence. It's no wonder they've at least once considered renouncing their U.S. citizenship. However, experts do not recommend taking such a step.

Why shouldn't you give up your U.S. citizenship?

According to financial advisor Alex Ingrim of Chase Buchanan Wealth Management, headquartered in Italy, it usually doesn't make financial sense, and there are several reasons why.

To renounce your citizenship is not a simple process, and it's hard to undo if you change your mind, says certified financial planner Jude Boudreaux, partner and senior financial''planner at The Planning Center in New Orleans.

How to avoid tax problems when moving overseas?

To avoid complex tax problems, taxpayers looking to move overseas next year need to think ahead about their tax residency and understand what their income will be: whether they will be working or depending on retirement savings.

"The U.S. and the country of residence may have an income and inheritance tax treaty (or) a harmonization treaty that deals with retirement income such as Social Security," says Judez Boudreaux, a member of CNBC's Financial Advisor Board. "It all depends on different rules. "

Some European countries, such as Portugal, tax income''retirees, so expats' double tax liability belongs to their country of residence, not the US, says Alex Ingrim.

Through such an arrangement, those who file a tax return in the US can use the amount of taxes paid in the other country to offset their tax liability to the US, he adds. For example, if Portugal has a higher tax rate, it eliminates your tax liability to the U.S..

Similarly, if you earn income in Portugal and pay taxes on that income in Portugal, you will get some credit when you file your tax return in the U.S. for taxes paid abroad, according to Boudreau.

Investing and investing abroad

Americans,'''those renouncing their U.S. citizenship may do so for the opportunity to explore different investment options or to live in low-tax countries, Ingrim says.

Some people may be interested in investing in European investment funds, exchange-traded funds, savings products and wealth management tools.

But, according to Boudreau, "if you buy an investment fund, you could be subject to very negative tax rules.

IRS treats these products as passive foreign investment organizations, or PFICs, and the government has rules about the types of structures U.S. taxpayers can invest in, says''he.

"Reporting is extremely labor intensive and costs a lot of money," he says. "For people who are just trying to build up savings, it can be really frustrating. "

The benefits of the U.S. financial system

This is especially true for Americans who make money in euros and don't want to send money back to the U.S. and invest in dollars, or if they want to take advantage of tax breaks that some European investment funds in certain jurisdictions may offer.

Despite the restrictions, U.S. citizens still have access to the U.S. financial system, and that's something to consider before giving up your passport. The US financial system is actually a huge''advantage, you can invest, trade and store money here for almost free, Ingrim says.

The unnecessary and expensive process of renouncing U.S. citizenship

The costly process of renouncing U.S. citizenship may be unnecessary, Boudreaux says.

"It's not necessarily easy, and it can be expensive, and it's one of those things that's hard to roll back if you've already done it," he says.

In addition, as Boudreaux notes, you may owe outbound taxes as an expat under the Helping Earnings Assistance and Tax Relief (HEART) Act of 2008.

"You can't just go away and not pay taxes on things you owned in the U.S. and then shipped overseas," he says. "There are virtually no ways to not pay''US taxes in any way'.