Trump’s 2025 Tax Policies: What U.S. Expats Need to Know and How to Prepare

UPDATE: July 4, 2025 – The “One Big Beautiful Bill Act” has been signed into law
You work hard to build a life abroad. The last thing you need is surprise tax bills or shifting rules that make planning impossible. We’ve researched every new House and Senate tax proposal, dug into the latest IRS guidance, and distilled the changes that truly affect you. Our goal: turn complicated legislation into clear next steps so you can make confident, stress-free decisions.

Headlines at a Glance

• Foreign‑Earned Income Exclusion (FEIE) rises to $130,000 for 2025, which you’ll report in 2026 for income earned in 2025.
• Trump has pledged to end “double taxation” on Americans abroad (No update on that yet)
• GOOD NEWS: The problematic Section 899 surtax was removed from the final bill following a G7 agreement.
• The Residence‑Based Taxation (RBT) bill needs to be reintroduced this session, and advocates on both sides of the aisle are pushing hard for it.
• PASSED: Tax Cuts and Jobs Act (TCJA) provisions are now permanently extended, avoiding the December 31, 2025, tax cliff.

Section 899 Removed – Good News for Expats

The controversial Section 899 “revenge tax” that would have imposed a 5-20% surtax on Americans living in countries with digital services taxes has been removed from the final bill. Treasury Secretary Scott Bessent reached an agreement with G7 allies, in which G7 countries will exclude U.S. companies from OECD Pillar 2 taxes in exchange for the U.S. removing Section 899 from the final legislation. This protects expats in the UK, Canada, France, Italy, Spain, Austria, Australia, and other countries at risk.

What’s Already Locked‑In for 2025

Inflation Adjustments You Can Count On

• FEIE: $130,000 per person (up from $126,500). Married filers who both qualify can shelter up to $260,000 of salary or self‑employment income.
• Foreign Housing Exclusion: The base housing amount rises to $20,800, and the general cap increases to $39,000, with higher limits for select high‑cost cities.
• Standard Deduction: $15,750 (single), $31,500 (joint), $23,625 (head of household) – now permanent
• Gift & Estate: Annual gift exclusion hits $19,000; estate exemption is $15 million per individual (increased from $13.99 million).

Why it helps: These figures are automatic. They guard against inflation and require no action on your part, but they’re worth factoring into year‑end planning so you don’t leave easy savings on the table.

Planning ahead? Create your free Greenback account to get started on your 2024 or 2025 taxes or catch up on any prior years you’ve missed. Start now »

Current Reality: What’s NOW LAW for 2025

Foreign Earned Income Exclusion (FEIE) Increases

For tax year 2025 (returns filed in 2026), the IRS has confirmed that the FEIE limit will increase to $130,000, up from $126,500 in 2024. Since the FEIE was enacted in 1962, it has increased yearly for inflation, except in 2010.

Here’s a breakdown of the 2025 FEIE Limit Increases:

• FEIE limit: $130,000 per qualifying person
• Married couples: If both spouses qualify, they can exclude up to $130,000 each, or $260,000 combined
• Foreign Housing Exclusion: Base limit increased to $20,800, with maximum general limit of $39,000
• Geographic adjustments: Higher limits available for expats in high‑cost cities

What this means for you: These adjustments are made annually for inflation and provide immediate relief. This is current law; no legislative uncertainty here.

Permanent Tax Adjustments

The signed legislation makes several provisions permanent:

• Standard deductions: $15,750 (single), $31,500 (married filing jointly), $23,625 (head of household) – indexed for inflation
• Tax brackets: Same rates (10%-37%), with permanently higher income thresholds
• Child Tax Credit: Permanently increased to $2,200 per child (up from $2,000)
• Estate tax exemption: Permanently increased to $15 million per person (up from $13.99M)

The Trump Promise: Ending Double Taxation for Americans Abroad

During his 2024 campaign, Trump addressed a key concern for Americans living abroad by supporting tax reform that would eliminate double taxation. His campaign acknowledged that US citizens overseas have long faced the burden of navigating complex dual tax obligations and indicated a commitment to addressing this issue that affects millions of American expats worldwide.

This represents the first time a US president has publicly supported this fundamental reform, marking a seismic shift in political momentum for expat tax relief.

The LaHood Bill: Residence-Based Taxation for Americans Abroad

Status: Expected Reintroduction – Must Restart Legislative Process

The Residence-Based Taxation for Americans Abroad Act (H.R.10468), introduced by Representative Darin LaHood (R-IL) in December 2024, expired when the 118th Congress ended in January 2025.

Where RBT Stands Today

• H.R. 10468 (LaHood, R‑IL) sketched a voluntary switch to residence‑based taxation. The bill expired with the last Congress and has to be reintroduced to move forward.
• The proposal would let compliant Americans abroad elect to be treated as non‑resident aliens for U.S. purposes, meaning only their U.S.‑source income stays taxable at home.
• A one‑time “departure tax” would apply only to ultra‑high‑net‑worth taxpayers (roughly $14 million+). Long‑term expats and so‑called Accidental Americans would be exempt.

Momentum check: 92.7% of 4,300 respondents in a February 2025 Democrats Abroad survey said they support RBT. Key advocacy groups have aligned behind a single text and are now courting bipartisan co‑sponsors.

The 2025 Tax Cliff: Crisis Averted

The Tax Cuts and Jobs Act (TCJA) has been permanently extended, preventing what would have been a massive tax increase on December 31, 2025.

Without the new law, the TCJA would have expired on December 31, 2025, triggering:

• Higher tax rates: The Top rate would have jumped from 37% to 39.6%
• Reduced standard deduction: Cut roughly in half
• Lost Child Tax Credit: Would have dropped from $2,000 to $1,000 per child
• QBI deduction elimination: 20% deduction for business income would have disappeared
• Estate tax reduction: Exemption would have been cut from ~$14M to ~$7M per person

For expats specifically, this permanent extension means:

• Foreign tax credits remain more valuable with lower US rates
• Reduced likelihood of owing US taxes despite foreign tax payments
• More straightforward calculations with stable tax brackets

Additional Tax Benefits in the Final Bill

SALT Cap Increase (Temporary)

• Old cap: $10,000
• New cap: $40,000 for 2025-2029, then reverts to $10,000
• Phase-out: Begins at $500,000 AGI
• Who benefits: Expats with rental property or business income in high-tax states

Tips and Overtime Tax Relief (2025-2028)

• Tips deduction: Up to $12,500 above-the-line deduction ($25,000 married filing jointly)
• Overtime deduction: Same limits as tips
• Phase-out: Begins at $150,000 AGI ($300,000 married filing jointly)

Enhanced Senior Deduction (2025-2028)

• New benefit: $6,000 deduction for taxpayers age 65+
• Phase-out: Begins at $75,000 AGI ($150,000 married filing jointly)

Smart Moves to Make Now

With the bill now signed into law, here’s your action plan:

• Celebrate the Section 899 removal: No more worrying about revenge taxes on foreign investments or spouses
• Update your tax projections: Use the new permanent rates and increased standard deductions
• Maximize FEIE planning: With $130,000 per person confirmed, optimize your 2025 income timing
• Consider SALT strategies: If you have U.S. rental income, the higher $40,000 cap might benefit you
• Keep residence documentation: RBT (or any treaty defense) will still rely on solid residence documentation

Need a personalized roadmap? A quick call with a Greenback expert can give you a clear action plan tailored to your income, country, and tax goals. Book your session »

FATCA, Banking, and Practical Life Abroad

Many foreign banks still close or restrict U.S. accounts to avoid IRS reporting. An RBT election would remove you from FATCA definitions and should reopen doors. Until then:

• Maintain current relationships and avoid sudden large transfers that trigger internal reviews.
• Keep copies of filed FBARs and Form 8938s; banks sometimes request proof of compliance.
• Ask your advisor about local options classified as “participating FFIs”—they already handle U.S. reporting and are less likely to off‑board customers.

Key Dates on the Horizon

• July 4, 2025: President Trump signed the “One Big Beautiful Bill Act” into law
• April 15, 2026: First returns claiming the $130,000 FEIE
• 2026-27: Possible first RBT elections (if new bill enacted)
• January 1, 2026: Permanent TCJA provisions take effect
• 2030: SALT cap reverts to $10,000

Frequently Asked Questions

Is Section 899 still a threat to expats?

No, Section 899 was removed entirely from the final bill. This is excellent news for expats living in countries with digital services taxes.

Do American citizens still pay taxes abroad?

Yes, under current citizenship-based taxation, Americans must file US tax returns on worldwide income regardless of where they live. However, exclusions like the FEIE and foreign tax credits often reduce or eliminate US tax liability.

What’s Trump’s current position on expat taxes?

Trump has endorsed ending double taxation for Americans abroad and specifically supported the LaHood bill for residence-based taxation. The removal of Section 899 demonstrates this commitment in action.

How are the new permanent tax rates different?

The TCJA rates (10%- 37%) are now permanent instead of expiring in 2025. This provides certainty and generally keeps rates lower than they would have been under the pre-2017 law.

What’s My Next Step?

• If you haven’t filed your 2024 taxes yet, complete them under current rules. The new provisions apply to your 2025 tax year.
• For 2025 planning, calculate how the higher FEIE and new deductions benefit your specific situation. Most expats will find their overall tax burden decreases significantly.

The bottom line: This legislation represents the most expat-friendly tax changes in decades. The higher FEIE alone means many Americans abroad will exclude more income than ever. Your tax situation improves substantially with permanent rate reductions and new deductions.

Trump’s broader commitment to ending double taxation remains alive, with stronger political momentum than before. This bill creates a foundation for more favorable treatment of Americans living abroad.

Ready to feel confident about your next move? Contact us, and one of our customer champions will gladly help. If you need specific advice on your tax situation, click below to get a consultation with one of our expat tax experts.

This article provides general information and should not be considered specific tax advice. Tax laws are complex and subject to change. Always consult with a qualified tax professional regarding your specific situation.