Trump’s Double Taxation Proposal: What US Expats Need to Know
The US, unusually among developed economies, at least nominally requires all citizens to pay income tax, regardless of whether they live or work inside the US. For the estimated 4.4 million Americans living abroad, this creates a filing burden that most other countries don’t impose on their expatriate citizens. Trump’s proposal would bring the US more in line with most other developed economies, which tax only those who live and work within their borders.
The good news? Current US tax law already provides powerful protections that eliminate most expats’ US tax liability. With the Foreign Earned Income Exclusion allowing you to exclude up to $130,000 in 2025 (up from $126,500 in 2024) and the Foreign Tax Credit providing dollar-for-dollar relief for foreign taxes paid, most Americans abroad already owe little to nothing in US taxes.
Greenback is an American company founded in 2009 by US expats for expats. We’ve helped over 23,000 expats file over 71,000 returns while maintaining a 4.9-star average on TrustPilot. Many of our CPAs and Enrolled Agents are expats themselves, living in 14 time zones, so they understand the challenges you face.
Trump’s Double Taxation Proposal Explained
During his October 2024 campaign, Trump expressed strong support for eliminating the double taxation burden faced by U.S. citizens living abroad. While his commitment to ending this issue for overseas Americans was clear, specific implementation details and methods remain to be determined.
The proposal has gained bipartisan interest, with Democrats Abroad supporting ending the double taxation of overseas Americans by shifting to a residence-based tax system. This would allow Americans to pay taxes only to the country where they live and earn income, similar to how most other developed nations handle their expatriate citizens.
Your Current Protection is Already Strong
While waiting for potential policy changes, it’s important to know that US tax law already provides substantial relief through two main protections:
Foreign Earned Income Exclusion (FEIE)
The FEIE allows you to exclude up to $130,000 in 2025 from US taxation on income earned while living abroad. This protection works best for expats in low-tax countries.
Example: Sarah works in Dubai (no income tax) earning $110,000 annually. Using the FEIE, she excludes her entire income and owes $0 in US taxes.
Foreign Tax Credit (FTC)
The FTC provides a dollar-for-dollar credit for foreign taxes paid, often eliminating US tax liability completely. This is ideal for expats in high-tax countries.
Example: Mark lives in Germany, earning €80,000 and paying €20,000 in German taxes. The Foreign Tax Credit covers his US tax obligation, resulting in $0 owed to the IRS.
Real-World Impact Scenarios
- Low-Tax Countries: Most expats use the FEIE to exclude income entirely. Countries like UAE, Monaco, or certain Caribbean nations with minimal income taxes make this strategy highly effective.
- High-Tax Countries: Expats in places like France, Sweden, or Canada typically benefit from the Foreign Tax Credit, as their local tax burden often exceeds what they’d owe the US.
- Mixed Income Situations: You can strategically combine both protections on different types of income to maximize your tax savings.
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What Changes Could Mean for You
A move to residence-based taxation could eliminate several current requirements:
- Annual US tax return filing while living abroad
- FBAR reporting for foreign bank accounts
- Complex calculations for the FEIE and FTC
- Potential penalties for late or missed filings
However, most Americans abroad likely owe nothing, or relatively little under current law anyway. For most, the burden is not the payment of tax: it is the filing of tax.
Congressional Support and Legislative Process
A new American bill aims to simplify taxes for U.S. expats with a residence-based system, fulfilling Trump’s campaign promise. Representative LaHood has introduced legislation in Congress that would implement residence-based taxation for Americans abroad.
Key requirements for any reform likely include:
- Tax compliance before qualifying for the new system
- Transparency and information sharing with the IRS
- Explicit criteria for establishing foreign residence
- Anti-avoidance measures for wealthy Americans
Staying Compliant While Changes Develop
Regardless of potential future changes, maintaining compliance with current law remains essential. Americans Overseas continues to advocate for fair and achievable reforms that address the needs of expatriates without creating undue economic consequences. Any future reforms would likely require adherence to current rules as a condition for participation.
Peace of Mind with Current System
While we monitor developments in Washington, remember that current protections are robust. We’ve helped over 23,000 expats achieve peace of mind knowing their taxes were done right. Our comprehensive expertise covers individual and business tax preparation, backed by our Make It Right guarantee.
Many clients tell us they were genuinely relieved to find Greenback and feel confident about their tax situation as expats. A genuine service mindset isn’t something that can be copied, only demonstrated year after year through consistent, accurate service.
Your Next Steps
Whether policy changes come or not, staying current with your US tax obligations protects your options and ensures compliance. Here’s what to do:
- File your current year return using available protections like FEIE and FTC
- Catch up on any missed years through Streamlined Filing Procedures if needed
- Stay informed about legislative developments without delaying current compliance
- Consult with experts who know both current law and potential changes
Get Professional Help
If you realize you’re in over your head and worried that you’ll mess it up, let us help. No matter how late, messy, or complex your return may be, we can help. You’ll have peace of mind, knowing that your taxes were done right.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also 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.
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