The One Big Beautiful Bill Act, signed into law on July 4, 2025, by President Donald Trump, introduces major tax, reporting, and policy changes with important implications for U.S. expats. This article explains exactly how the big beautiful bill affects taxpayers living abroad. We provide a direct, clear breakdown based on the final house bill text and updates from the Senate bill and IRS guidance.
Key Provisions for Expats in the Big Beautiful Bill
Here’s how the One Big Beautiful Bill and related legislation impact U.S. citizens and green card holders living abroad:
1. New 1% Remittance Tax
Starting January 1, 2026, a 1% federal remittance tax will apply to outbound money transfers from the U.S. when using cash, money orders, or cashier’s checks. Transfers funded via U.S.-issued debit or credit cards or ACH are excluded.
For U.S. expats, this means that sending money from U.S. bank accounts to another country could trigger the tax. However, if you use a qualified remittance transfer provider, you may be eligible for a refundable tax credit when filing your U.S. return.
This new excise tax impacts expats with foreign entity ties, small businesses, and those transferring funds from domestic income or tips earned in the U.S.
For a full breakdown of who’s affected, what’s taxed, and how to avoid overpaying, read our detailed guide: U.S. Remittance Tax: What to Know Before Sending Money Abroad
2. Foreign Tax Credit Preserved
The foreign tax credit (FTC) remains available, offering taxpayers a vital tool to prevent double taxation on income earned in foreign countries. For example, if your taxable income is taxed at 40% abroad and 20% in the U.S., the FTC ensures you aren’t taxed twice.
The big beautiful bill act removed a proposed surtax on the FTC, a victory for taxpayers in high-local tax countries like France and Germany.
3. Child Tax Credit Expanded
The child tax credit is raised from $2,000 to $2,500 per child through tax year 2028. Eligibility rules now require only one parent to have a social security number, not both, as under current law.
Children must have a valid SSN; ITINs are no longer accepted. This change benefits mixed-status American families, but some expats may need to take decisive steps to secure documentation for dependents.
Reporting Rules for Expats: What’s Changing
1. FBAR and FATCA Thresholds: No Change
Despite speculation, the big beautiful bill does not lower thresholds for FBAR or Form 8938 (FATCA) filings. The existing thresholds remain:
- FBAR: Required when foreign account balances exceed $10,000 at any point during the year.
- FATCA/Form 8938: Required when foreign assets exceed $200,000 (single) or $400,000 (joint), or higher thresholds for expats under IRS guidelines.
The bill does not introduce new enforcement mechanisms or penalties specifically related to FBAR or FATCA filings. However, taxpayers should still be diligent, as penalties for noncompliance remain significant under existing law.
Expats should:
- Keep detailed financial records
- Report all foreign income and accounts
- Work with a tax professional for guidance on deduction phases and compliance
2. Foreign Gifts and Inheritances: Thresholds Adjusted
Under the big beautiful bill, the reporting threshold for foreign gifts and inheritances received by U.S. persons has been adjusted. Previously, individuals were required to file Form 3520 if the total value of gifts or bequests from a foreign person exceeded $100,000 in a calendar year.
The new house bill version of the law reduces that threshold to $50,000. This means more U.S. expats will need to report foreign gifts or inheritances, even if the amounts are modest by previous standards.
The bill also tightens the penalties for non-compliance, including automatic monetary fines for late or missing filings and greater scrutiny of gross income arising from inheritances linked to a foreign entity.
Expats should:
- Track the total value of all foreign gifts and inheritances per tax year
- File Form 3520 if the revised lower threshold is met
- Seek advice from tax professionals for accurate and timely reporting
Adjustments to Deductions and Credits
1. Standard Deductions & Itemized Deductions
- Standard deductions have been adjusted for inflation.
- Itemized deductions now include limitations tied to gross income and taxpayer’s taxable income.
- The deduction cap on state and local tax (SALT) has increased to $40,000 for joint filers earning under $500,000, and $250,000 for individuals.
This benefits expats with U.S. property, ongoing local tax liabilities, or those filing partial-year returns in high-tax states.
2. Tax on Tips and Overtime Pay
The tax on tips and tax on overtime includes new documentation rules. Employers must verify and report qualified overtime compensation and tip income more accurately. Expats with U.S. employers should expect changes in W-2 reporting.
These changes apply to:
- Wages received for remote work tied to U.S. employers
- Tips and bonuses related to U.S. contracts or companies
Business Incentives: What’s In It for Expat Entrepreneurs
The big beautiful bill expands support for small business owners:
- Bonus depreciation and capital investment deductions extended
- Domestic research credits enhanced
- Continued deductions for car loan interest and business car loans
If you run a business abroad with U.S. incorporation or earnings, these updates affect your taxable year and how you plan deductions.
Education, Energy, and Other Considerations
1. Higher Education and Scholarships
The bill maintains deductions for higher education expenses and contributions to scholarship granting organizations.
2. Natural Gas and Energy Incentives
The beautiful bill expands credits tied to natural gas, oil, and gas development projects. This may affect expats investing in U.S. energy firms.
These changes are aligned with the goals of the Inflation Reduction Act while advancing economic growth through capital investment.
Legislative Context and Future Outlook
This house version of the big beautiful bill was pushed by house republicans and later aligned with the senate bill through congressional reconciliation. Together, they aim to:
- Spur economic growth
- Ensure long-term tax cuts
- Raise total receipts through better enforcement
For the next decade, expect more law updates around:
- Deduction phases
- Expanded standard deductions
- Additional taxpayer guidance
The federal government plans to revisit some provisions depending on inflation, compliance data, and the debt ceiling.
Final Thoughts
The One Big Beautiful Bill brings both opportunities and challenges for U.S. expats. While the foreign tax credit and child tax credit remain in place, new excise taxes, reporting requirements, and deduction limitations raise the stakes.
Whether you’re managing a small business, living off social security income, or planning for higher education, these updates affect your tax year, gross income, and how you file.
Stay informed, stay compliant, and use this beautiful bill as a chance to optimize your international tax strategy.
