Watch out for the whole double taxation issue. You will need to pay taxes to the US (there's a certain income threshold if I remember correctly, but you'd likely surpass it). If you wind up taking permanent residency, you may need to renounce your US citizenship to stop having to owe taxes Stateside.
Even if you renounce your US citizenship you're still considered a US person for a few years, and still required to file.
The most important thing to remember to do is file every year. The US is the only country in the World which requires it's non-resident citizens to file tax returns every year. Also, don't forget to do your FBAR, or face huge penalties like $10,000 fines.
I'm an American who has lived in The Netherlands since 2002. I engage a competent tax preparer every year and pay through the nose for him, you should expect to do the same. When I last lived in the USA my tax return was 2-4 pages. Now it's over 70 pages long and incredibly complex. It's just something you have to deal with if you live overseas.
The day you renounce your US citizenship, you are no longer a US person (unless the State Department has a valid reason to deny your renunciation).
It may take several months, or more than a year, for the State Department to issue you your Certificate of Loss of Nationality (CLN). However, the effective date of your loss of citizenship is the day you signed the papers and swore your oath of renunciation at the Embassy or Consulate.
You are only required to file taxes with the IRS for the year you renounced, and only for whatever you earned up to the date of your renunciation. Before the HEART Act of 2008, you may have been required to continue filing, and paying US taxes. However, that has now been replaced with a one-time exit tax on unrealized gains, for "covered expatriates" (http://en.wikipedia.org/wiki/Expatriation_tax).
ianal but my understanding is that americans do have to pay us income tax on worldwide income, but they can deduct taxes paid to a local government. in other words, if you would have had to pay $100 in taxes to the us, but paid $75 to a local government, then you would only pay $25 to the us. if your taxes in the foreign country exceed the amount you would have had to pay in the us, then you don't owe the us anything.
Between the Foreign Tax Credit and the Foreign Earned Income Exclusion... You'd need a fair amount of US income or very low taxes in your new home country to generate a US tax burden. But. You still have to file.
A point: you can't renounce US citizenship if all you have is permanent residency. You have to have citizenship elsewhere before the US will recognize you having renounced its citizenship.
Actually, you can renounce with only permanent residency.
I personally know someone here in Paraguay who has done it. He's now stateless. The Embassy highly suggests that you have another citizenship. However, they will accept a renunciation if you don't have one.
It sounds scary but just like someone else pointed out it only applies if you're in a country with a lower tax bracket. Since federal income taxes are fairly low in the US it's not likely to be an issue unless you migrate to a country with even lower taxes. On top of that, some (Western) countries have a treaty with the US to avoid double taxation and exempt you from filing taxes in both countries if you reside in either country for the majority of the year that the taxes are filed for.
(http://www.irs.gov/Individuals/International-Taxpayers/U.S.-...) -- "Your worldwide income is subject to U.S. income tax, regardless of where you reside."