The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, is the most sweeping U.S. tax overhaul since 2017.

While it extends many Tax Cuts, it also introduces new provisions that affect inbound and outbound expatriates.

Below we summarize key changes and considerations, including new deductions, changes to foreign earned income provisions, reporting obligations, and residency rules.

New Deductions Or Changes For Foreign Nationals Moving To The U.S. (Inbound Expats)

Moving Expense Deduction

Unfortunately for new U.S. residents, OBBBA permanently disallows the moving expense deduction (and the exclusion for employer-paid moving reimbursements) for non-military taxpayers.

This means foreign nationals relocating for work can no longer deduct their moving costs (which had been suspended under TCJA and now will not return).

In practice, inbound employees should negotiate tax gross-ups on moving packages, since moving benefits are fully taxable. Only active-duty military (and certain intelligence community members) remain eligible for the moving expense deduction.

Standard Deduction And Dual-Status Issues

OBBBA locked in a much larger standard deduction (now $15,750 single / $31,500 joint for 2025 and indexed) as a permanent feature.

However, non-resident aliens still cannot use the standard deduction.

A foreign national who arrives mid-year will file as a dual-status alien, generally paying U.S. tax only on U.S.-source income for the non-resident portion of the year, but with no standard deduction for that part.

If they qualify, they might elect to be treated as U.S. resident for the full year (under IRC §7701(b)(4)) to claim the standard deduction – but that subjects their full-year worldwide income to U.S. tax.

These first-year elections rules are unchanged under OBBBA, so careful timing and modeling is needed to decide the optimal filing status.

Tax Treaty Provisions

Inbound taxpayers should also review tax treaty provisions. If a treaty tie-breaker would treat them as resident of their home country for part of the year, they may use that (since they are not U.S. citizens, the treaty saving clause doesn’t bar it), though doing so can be complex.

OBBBA did not create any new inbound tax exemptions or basis step-ups – meaning new residents receive no automatic step-up in basis for assets they owned before moving.

Planning Tip. For inbound individuals – consider disposing of highly appreciated foreign assets before becoming a U.S. resident, or to be prepared for U.S. tax on the full gain if sold post-arrival (since U.S. basis will generally be original cost).

“Remittance Tax” On Outbound Transfers

A novel provision imposes a 1% excise tax on certain money transfers from the U.S. to foreign recipients (effective for transfers after 2025).

This is aimed at cash remittances – for example, an expat worker in the U.S. sending cash to family overseas via a money transfer service would pay a 1% tax, collected by the remittance provider.

However, transfers from U.S. bank accounts or by U.S. debit/credit card are exempt, so immigrants and foreign workers in the U.S. can plan around this by using bank-to-bank transfers instead of cash remittance services to avoid the fee.

While not a “deduction,” this new tax is a consideration for inbound expats who regularly send funds abroad.

Other Inbound Notes

OBBBA’s major individual tax cuts (rate reductions, bigger child credits, etc.) generally benefit U.S. residents and citizens across the board, including recent arrivals.

For example, the Child Tax Credit (CTC) was increased to $2,500 per child (from $2,000).

However, the act tightened ID requirements. Now at least one parent filing jointly must have an SSN to claim the refundable portion of the CTC.

This is actually easier than the initially proposed rule that both parents have SSNs – a relief for mixed-nationality couples.

Children still need SSNs (ITINs don’t qualify) as before. Inbound expats should obtain SSNs for themselves and their U.S.-citizen children as soon as possible to maximize credits.

Finally, note that state tax obligations might still follow a new arrival (if they establish residency in a U.S. state).

OBBBA temporarily raised the federal state and local tax (SALT) deduction cap from $10k to $40k (through 2029, with AGI phase-outs). This provides some relief if a new resident pays significant state/local taxes.

However, non-residents and dual-status filers generally cannot benefit from the standard deduction or SALT deduction unless they elect full-year residency, so the practical benefit is limited to those fully subject to U.S. tax.

Changes For Americans Moving Or Living Abroad (Outbound Expats)

Foreign Earned Income Exclusion (FEIE) And Housing Exclusion

The FEIE – a key tax break for U.S. expats – continues unchanged in mechanism, with annual inflation adjustments.

For 2025, the FEIE cap rises to $130,000 per qualifying individual (up from $126,500 in 2024).

Married couples who both qualify can exclude up to $260,000 of foreign wage or self-employment income.

The foreign housing exclusion/deduction was also adjusted. The base housing amount is $20,800 and the general housing cost limit about $39,000 for 2025 (with higher caps for certain high-cost cities abroad).

Bottom line. Americans abroad can exclude a bit more income due to inflation indexing; OBBBA did not restrict these exclusions.

Expats should continue to track their bona fide residence or physical presence test status carefully each year to maintain FEIE eligibility – the law did not change the qualification tests (12+ months abroad or 330-day rule).

Foreign Tax Credit (FTC) And Tax Treaties

One initial concern was a provision known as Section 899 (nicknamed the “revenge tax”) that would have penalized Americans in countries with “unfair” taxes (initially aimed at nations with digital services taxes, etc.), effectively limiting the use of foreign tax credits in those cases.

Good news. After international pushback, Section 899 was removed from the final bill. Thus, U.S. expats retain full access to the FTC* to offset foreign income taxes paid, and no new surtax will apply on income from any particular country.

The FTC system remains as before, so Americans abroad can generally credit foreign taxes dollar-for-dollar against U.S. tax on the same income (up to limits), helping avoid double taxation in high-tax countries.

In fact, one tweak in OBBBA actually improves FTC usage for some expats. The act reduces the “deemed paid” foreign tax credit haircut from 20% to 10%.

This mostly affects those with GILTI (Global Intangible Low-Taxed Income) from controlled foreign corporations – now renamed “Net CFC Tested Income” – where previously only 80% of foreign taxes were creditable. Going forward, 90% of foreign taxes on GILTI/NCTI will be creditable.

For an entrepreneur abroad who owns a foreign corporation, this could modestly lower U.S. tax on high-taxed foreign earnings (since more of the foreign tax can offset U.S. tax).

Other international business provisions – like making the CFC look-through rule permanent and restoring certain attribution rules – may ease tax burdens on expats with complex structures.

No Switch To Pure Residency-Based Taxation (Yet)

Despite hopes in the expat community, OBBBA did not end citizenship-based taxation.

U.S. citizens and green card holders are still taxed on worldwide income regardless of residence. President Trump had promised to “end double taxation” on Americans abroad and supported a residence-based taxation (RBT) proposal, but that was not included in this bill.

A separate bill (the LaHood RBT Act) was introduced and may be debated later, but as of now nothing has changed: Americans abroad must continue filing annual U.S. tax returns, FBARs, etc., on their worldwide income and assets.

The FEIE and FTC remain the primary tools to mitigate double taxation.

Tax treaties also remain in effect, but remember the “saving clause” in U.S. treaties generally prevents U.S. citizens from using treaty residency tie-breakers to avoid U.S. tax.

OBBBA did not alter any treaty provisions or the saving clause. (In practical terms, a U.S. citizen cannot use a tax treaty to claim non-residency and escape U.S. tax – you’d have to expatriate to do that. For long-term green card holders, using a treaty to be treated as a non-resident can trigger the expatriation rules – see below.)

Foreign Housing, Meals, And Other Deductions

Aside from the FEIE/housing exclusion adjustments noted, OBBBA didn’t take away expat-specific deductions.

For instance, the housing exclusion formula under §911 remains in place.

Some expats who work for foreign employers may have access to tax-equalization or housing reimbursement plans – those too are unchanged by the law (though employers might need to recalibrate tax projections given other changes).

One Item To Note. If an outbound U.S. employee was hoping the moving expense deduction might be restored for their move abroad, that is not the case – as mentioned, moving expense write-offs remain disallowed for civilians. Employers should gross-up any moving allowances for U.S. employees relocating overseas, since those payments will be taxable compensation to the employee.

Estate And Gift Tax Relief

Many Americans abroad worry about U.S. estate tax on worldwide assets.

OBBBA increased the unified estate/gift tax exclusion to $15 million per individual (up from ~$14M). This high exemption (available through 2030) greatly reduces the number of expats subject to U.S. estate tax.

It also presents a planning opportunity. Wealthy expats considering renouncing U.S. citizenship can use the large gift exemption now to shed assets and potentially get their net worth below the $2 million “covered expatriate” threshold.

By utilizing the $15M exemption to gift assets tax-free now, an expat could avoid the exit tax entirely upon expatriation. (For example, an American abroad with $10M net worth can gift, say, $5M to a trust for their children – using up part of the $15M exemption – and thereafter be under $2M net worth, avoiding covered expatriate status if they renounce.)

Caution. The $15M exemption isn’t guaranteed forever; it’s set to revert (likely to ~$6M) in 2031 unless extended.

Thus, expats with estate tax concerns might act sooner rather than later. OBBBA did not otherwise change the exit tax regime under §877A – any U.S. citizen or long-term green card holder who expatriates with net worth above $2M (or failing other tests) still faces the mark-to-market exit tax.

Proper planning (now aided by the high exemption) remains crucial.

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Source: https://csttax.com/en-gb/blog/impact-of-the-2025-one-big-beautiful-bill-act-on-expat-taxation/