The One Big Beautiful Bill Act (OBBB) and Expat Taxes: Every Change That Affects Americans Abroad
The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, is the most significant U.S. tax legislation since the 2017 Tax Cuts and Jobs Act. For Americans living abroad, the law permanently extends the TCJA individual tax provisions that were set to expire on December 31, 2025, increases the Child Tax Credit to $2,200 per child, raises the estate tax exemption to $15 million, and keeps the standard deduction at its expanded levels ($15,750 single / $31,500 MFJ for 2025, rising to $16,100 / $32,200 for 2026).
The law did not include residence-based taxation or any change to the Foreign Earned Income Exclusion or Foreign Tax Credit. Americans abroad must still file U.S. returns and report worldwide income. However, the controversial Section 899 “revenge tax” was removed from the final bill, and the FEIE and FTC remain fully intact.
According to the IRS, many OBBB provisions apply retroactively to the 2025 tax year (filed in 2026), while others take effect January 1, 2026. Here’s every change that affects expats, what stayed the same, and where residence-based taxation stands.
Tax Laws Just Changed
What Changed for Expats Under the OBBB
Permanent TCJA Extension (The Tax Cliff That Didn’t Happen)
The single most important provision for expats: the TCJA individual tax rates (10% through 37%), expanded standard deduction, and suspended personal exemptions are now permanent. Without the OBBB, these would have reverted to pre-2018 levels on January 1, 2026, resulting in higher tax rates, lower standard deductions, and the return of personal exemptions with a lower overall value.
| Provision | Pre-TCJA (would have returned) | OBBB (now permanent) |
|---|---|---|
| Tax rates | 10%-39.6% (7 brackets) | 10%-37% (7 brackets) |
| Standard deduction (single) | ~$7,500 | $15,750 (2025) / $16,100 (2026) |
| Standard deduction (MFJ) | ~$15,000 | $31,500 (2025) / $32,200 (2026) |
| Personal exemptions | ~$5,300 per person | $0 (permanently suspended) |
| SALT deduction | Unlimited | Capped at $40,000 (2025-2028, indexed) |
Child Tax Credit: Increased to $2,200
The CTC is permanently increased from $2,000 to $2,200 per qualifying child. The refundable portion (ACTC) rises to $1,700. Both amounts will be indexed for inflation going forward.
New SSN requirement: Both the taxpayer (or at least one spouse on a joint return) AND the qualifying child must have a Social Security number. This is a change from prior rules, where only the child needed an SSN.
Expat trap: If you use the FEIE to exclude your income, you lose access to the refundable ACTC. Expat families with children should evaluate whether the Foreign Tax Credit produces a better result. See our FEIE vs. FTC comparison.
Estate Tax Exemption: $15 Million (Permanent)
The estate tax exemption is permanently set at $15 million per individual ($30 million for married couples), indexed for inflation. Without the OBBB, this would have reverted to approximately $7 million. For expats with cross-border estates, this provides long-term planning certainty.
Senior Deduction: $6,000 (2025-2028)
Taxpayers age 65 and older can claim an additional $6,000 deduction on top of the standard deduction. This phases out for MAGI above $75,000 single / $150,000 MFJ. This is temporary (2025-2028). For retirees abroad, this stacks with the FEIE or FTC, potentially creating additional tax savings.
No Tax on Tips and Overtime (2025-2028)
Workers can claim a deduction for qualifying tip income (up to $25,000 MFJ) and overtime pay (up to $25,000 MFJ). These are temporary provisions and unlikely to affect most expats directly, since they require U.S. employer-reported wages with specific W-2 designations.
SALT Deduction Cap: $40,000 (2025-2028)
The state and local tax (SALT) deduction is capped at $40,000 for 2025-2028, up from $10,000 under the TCJA. This primarily affects expats who maintain U.S. property or pay state taxes in high-tax states. The cap phases down for taxpayers with AGI above $500,000.
1099-K Threshold: Reverted to $20,000
The OBBB retroactively restored the 1099-K reporting threshold to $20,000 and 200+ transactions, killing the planned $600 threshold. For expats who freelance or sell goods through U.S. payment platforms, this means significantly fewer 1099-K forms. See our 1099-K thresholds guide for details.
1099-NEC/MISC Threshold: Rising to $2,000 (Starting 2026)
Beginning with payments made in 2026, the reporting threshold for Form 1099-NEC (nonemployee compensation) and Form 1099-MISC rises from $600 to $2,000, indexed for inflation starting in 2027. This reduces paperwork for freelance expats receiving U.S.-source payments.
BOI Reporting: U.S. Companies Exempt
All U.S.-formed companies are now exempt from beneficial ownership information (BOI) reporting under FinCEN’s interim final rule (March 26, 2025). Only foreign entities registered in a U.S. state must still file. See our BOI registry update for the full timeline.
Section 899 Removed: The “Revenge Tax” Is Dead
The Section 899 surtax would have imposed a 5-20% additional tax on certain income connected to countries with “discriminatory” tax regimes (primarily countries with digital services taxes). This would have directly threatened FTC eligibility for Americans in the UK, Canada, France, Italy, Spain, Austria, Australia, and other countries.
Following a G7 agreement in which allied nations agreed to exclude U.S. companies from OECD Pillar 2 top-up taxes, Section 899 was removed from the final OBBB. Expats in affected countries retain full access to the Foreign Tax Credit with no new restrictions.
What Did NOT Change for Expats
| Provision | Status |
|---|---|
| Citizenship-based taxation | Unchanged. U.S. citizens and green card holders must still file on worldwide income. |
| FEIE | Unchanged. $130,000 for 2025, $132,900 for 2026. |
| Foreign Tax Credit | Unchanged. Dollar-for-dollar credit for foreign taxes paid. |
| FBAR | Unchanged. $10,000 threshold, April 15 deadline (auto-extended to October 15). |
| FATCA (Form 8938) | Unchanged. Same reporting thresholds. |
| Physical Presence / Bona Fide Residence tests | Unchanged. Same qualification rules for FEIE. |
| Streamlined Filing Procedures | Unchanged. Still available for non-willful non-filers. |
Bottom line for most expats filing in 2026: Your return will look very similar to last year. The FEIE increased due to inflation. The standard deduction is slightly higher. The CTC went up by $200 per child. Tax rates are the same. The OBBB primarily prevented things from getting worse (by extending the TCJA) rather than creating dramatic new benefits for Americans abroad.
Where Does Residence-Based Taxation Stand?
The Residence-Based Taxation for Americans Abroad Act, originally introduced by Rep. Darin LaHood (R-IL) as H.R. 10468 in December 2024, expired when the 118th Congress ended. The bill was not included in the OBBB.
Current status (as of early 2026):
- Reintroduction expected Q1 2026. Rep. LaHood and Sen. Todd Young (R-IN) are working on an updated version that addresses technical issues and community feedback from the original draft.
- JCT scoring in progress. The Joint Committee on Taxation must produce a revenue estimate (or “score”) before reintroduction. This has been the primary bottleneck. JCT has been occupied with OBBB implementation and other committee requests.
- Bicameral support confirmed. Both a House (LaHood) and Senate (Young) version are being developed simultaneously, which improves legislative prospects.
- Not eligible for reconciliation. Due to the Senate’s Byrd Rule (which prohibits Social Security changes in reconciliation bills), the RBT bill would need to pass through regular order with bipartisan support or attach to a year-end tax bill.
- Pope Leo XIV factor. The election of the first American pope in May 2025 brought new attention to the absurdity of citizenship-based taxation. Rep. Jeff Hurd (R-CO) introduced the Holy Sovereignty Protection Act (H.R. 4501) to exempt the Pope from U.S. taxes, which advocacy groups have used to draw attention to the broader RBT cause.
What the LaHood bill would do (if reintroduced and passed):
- Allow compliant Americans abroad to elect nonresident status for U.S. tax purposes
- Tax only U.S.-source income (like a nonresident alien)
- Reduce FBAR and FATCA reporting burdens
- Apply a one-time departure tax for ultra-high-net-worth individuals (~$14M+)
- Exempt long-term expats and accidental Americans from the departure tax
Reality check: RBT is not law and may not become law this session. All Americans abroad must continue filing U.S. returns, FBARs, and FATCA reports under existing rules. Do not delay filing or change your compliance approach in response to proposed legislation.
2025 vs. 2026 Tax Year Figures for Expats
| Provision | 2025 (Filed in 2026) | 2026 (Filed in 2027) |
|---|---|---|
| FEIE | $130,000 | $132,900 |
| Standard deduction (single) | $15,750 | $16,100 |
| Standard deduction (MFJ) | $31,500 | $32,200 |
| Child Tax Credit | $2,200 per child | $2,200+ (indexed) |
| Estate exemption | $15,000,000 | Indexed for inflation |
| Annual gift exclusion | $19,000 | Indexed for inflation |
| FBAR threshold | $10,000 | $10,000 |
| Senior deduction (65+) | $6,000 | $6,000 |
| SALT cap | $40,000 | $40,000 |
| 1099-NEC/MISC threshold | $600 | $2,000 |
What Should Expats Do Now?
For your 2025 return (filed in 2026):
The OBBB provisions that apply retroactively to 2025 are already reflected in the current IRS forms and instructions. Your Greenback accountant will apply the updated standard deduction, CTC amount, and any other relevant changes automatically. No special action is needed on your part.
For 2026 planning:
The FEIE increases to $132,900 for 2026. If you’re approaching the exclusion limit, consider whether the Foreign Tax Credit produces a better result, especially in high-tax countries. The higher 1099-NEC threshold ($2,000) reduces reporting for freelancers starting in 2026. The senior deduction ($6,000) is available for expat retirees through 2028.
For RBT:
Monitor developments, but do not change your filing behavior. Continue filing U.S. returns and FBARs as required. If the LaHood-Young bill is reintroduced and gains traction, we will update this article and notify clients through the Greenback newsletter.
At Greenback, we’ve been tracking these legislative developments since the OBBB was first proposed and have updated our filing processes to incorporate every change. Whether you’re filing your 2025 return, catching up on prior years through Streamlined Filing, or planning ahead for 2026, our CPAs and Enrolled Agents handle the complexity so you don’t have to.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions about how the OBBB affects your specific situation, contact our Customer Champions.
Make Sure You’re Filing Under the Latest Rules
This article is for informational purposes only and should not be considered tax or legal advice. Tax legislation is subject to change, and the RBT bill discussed above has not been enacted. For the latest IRS guidance on OBBB provisions, see the IRS OBBB provisions page. Always consult with a qualified tax professional regarding your specific situation.
Related Resources
- Foreign Earned Income Exclusion
- Foreign Tax Credit Guide
- FEIE vs. FTC: Which Strategy Saves You More?
- Child Tax Credit for Expats
- Section 899 “Revenge Tax” (Removed)
- Residence-Based Taxation: The LaHood Bill
- Form 1099-K Thresholds (OBBB Reversion)
- BOI Reporting Update (U.S. Companies Exempt)
- Streamlined Filing Procedures
- Estate Planning and Inheritance Taxes Abroad
