August 2025 - Monthly Newsletter

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”) into law. The following is a summary of certain key provisions that are typically relevant for U.S. expats.

We’ve divided the provisions into three categories: Individual, Business, and International.

Individual Provisions

• Makes permanent the TCJA income tax rates and threshold decreases for individuals, estates, and trusts (the maximum rate of which is 37%). This applies inflation adjustment to 10%, 12%, and 22% brackets. This applies to tax years beginning after Dec. 31, 2025.
• Increases the child tax credit to $2,200 per qualifying child, indexed annually for inflation. Makes permanent the refundable portion and higher phaseout thresholds. Tightens Social Security number reporting rules. This applies to taxable years beginning after Dec. 31, 2024.
• Increases the standard deduction from $12,000 to $15,750 for singles and marrieds filing separately (and double that amount for joint filers) and from $18,000 to $23,625 for heads of household. This applies to taxable years beginning after Dec. 31, 2024.
• Increases limitation on SALT deduction to $40,000 for 2025 and $40,400 for 2026, increasing to 101% of previous year's cap for 2027, 2028, and 2029, and reverting to $10,000 for 2030 and beyond. MAGI phaseout begins at $500,000 for 2025 and $505,000 for 2026, increasing to 101% of the previous year's threshold for 2027, 2028, and 2029 (half of those amounts for married filing separately). The phaseout cannot reduce the deduction below $10,000. This applies to taxable years beginning after Dec. 31, 2024. 
• Creates a deduction for seniors equal to $6,000 reduced (not below zero) by 6% of AGI exceeding $75,000 ($150,000 joint). Requires valid SSN. Requires married taxpayers to file a joint return. Treats incorrect SSNs as mathematical or clerical errors. This applies to taxable years beginning after Dec. 31, 2024, and before Jan. 1, 2029.
• Limits itemized charitable contribution deduction by imposing a floor equal to 0.5% of the taxpayer's contribution base for the taxable year. This applies to taxable years beginning after Dec. 31, 2025.
• Creates a limited deduction for certain tip income and overtime pay. This applies to taxable years beginning after Dec. 31. 2024, and before Jan. 1, 2029.
• Provides for tax-exempt "Trump accounts" for qualifying children; accounts are treated akin to individual retirement accounts (IRAs) under IRC 408(a). Annual contributions are limited to $5,000, indexed annually for inflation, with exceptions for certain exempt contributions. Excludes employer contributions to Trump accounts from employee gross income. Excludes qualified contributions to a Trump account from beneficiary’s gross income. Credits established accounts for U.S. citizens born after Dec. 31, 2024, but before Jan. 1, 2029, with an initial government contribution of $1,000.
• Permanently extends suspension of miscellaneous itemized deductions from previous sunset of 2025 but allows miscellaneous itemized deduction for unreimbursed educator expenses. This applies to taxable years beginning after Dec. 31, 2025.
• Permanently increases the estate and gift tax exemption amount to $15M, indexed annually for inflation. This applies to estates of decedents dying and gifts made after Dec. 31, 2025.

Business Provisions

• Permanently extends 20% deduction for qualified business income (“QBI”), increases phase-in income limitations (or deduction phase-out amounts), and adds inflation-adjusted minimum deduction of $400 for taxpayers with at least $1,000 of qualifying income from active qualified trades or businesses. This applies to taxable years beginning after Dec. 31, 2025.
• Changes provisions relating to the small business stock gain exclusion. In brief, it provides an exclusion from gross income of 50% of gain from the sale or exchange of qualified small business stock (QSBS) held for at least 5 years and acquired before Feb. 17, 2009, 75% when acquired between Feb. 17, 2009, and Sept. 27, 2010, and 100% when acquired after Sept. 27, 2010, and on or before July 4, 2025. For QSBS acquired after July 4, 2025, the exclusion is 50% when held for at least 3 years, 75% for at least 4 years, and 100% for at least 5 years.
• Permanently reinstates 100% bonus depreciation. Allows taxpayers to elect 40% bonus depreciation (60% for long production period property and qualified aircraft) for qualified property placed in service, and specified plants planted or grafted, during first taxable year ending after Jan. 19, 2025. This applies to property acquired, and specified plants planted or grafted, after Jan. 19, 2025. Does not treat property as acquired after the date on which a written binding contract for its acquisition is entered into.

International Provisions

• Renames the GILTI regime to now be the “Net CFC Tested Income” regime. Removes NDTIR, otherwise known as the “QBAI” exclusion, from the calculation (rendering the term “GILTI” superfluous). This applies to taxable years beginning after Dec. 31, 2025.
• Reduces the deduction percentage for net CFC tested income (f/k/a GILTI) to 40% (from the current 50%), resulting in a 12.6% effective tax rate (ETR). This applies to taxable years beginning after Dec. 31, 2025.
• Reduces the GILTI "haircut" to 10% (from the current 20%), such that 90% of the foreign taxes deemed paid on GILTI are eligible for a foreign tax credit. Thus, no residual U.S. tax would be owed on income subject to a 14% foreign tax rate (12.6% ETR divided by 90%). The haircut decrease applies to taxable years of foreign corporations beginning after Dec. 31, 2025. The new rule also applies to earnings previously taxed as GILTI, and distributed after June 28, 2025.
• Provides that if a foreign corporation is a CFC at any time during a taxable year, each U.S. shareholder which owns stock in such corporation during the CFC’s year must include in gross income their pro rata share of the CFC’s subpart F income. Ensures that a U.S. shareholder of a CFC recognizes their pro rata share of the CFC’s subpart F income, irrespective of ownership at the end of the taxable year. This applies to taxable years beginning after Dec. 31, 2025.