Impact of the “One Big Beautiful Bill” (OBBBA) on U.S. Expats

The “One Big Beautiful Bill Act” (often shortened to OBBB/OBBBA) is the current administration’s flagship tax package in the 119th Congress (H.R. 1).

While most headlines focus on domestic cuts and credits, Americans living abroad are asking a simpler question: What does this mean for me in terms of expat tax obligations?

Here’s a clear, practical walkthrough of what’s changed (or is poised to change), where the rules are still in flux, and how U.S. expats can plan for the 2025 tax year filed in 2026.

What’s in the bill—and why expats should care

1) Core tax framework extended and “made permanent.”

A central aim of OBBB is to lock in many of the reduced rate structures and larger deductions that were set to sunset after 2025.

House materials describe permanent treatment for the near-doubled standard deduction and related adjustments, providing longer-range certainty for planning, including for Americans abroad who still file U.S. returns.

2) New targeted provisions with everyday ripple effects.

OBBB includes smaller, technical changes that can still matter to expats—e.g., a new additional deduction for seniors for 2025–2028.

That kind of provision won’t directly change foreign tax credit (FTC) mechanics or treaty rules, but it affects overall U.S. taxable income, which in turn can influence whether you use the Foreign Earned Income Exclusion (FEIE), the FTC, or both.

3) The FEIE amount for 2025.

Several practitioner sources report that the FEIE rises to $130,000 for 2025, up from $126,500 in 2024.

If confirmed in IRS tables, expats will claim it when filing 2025 income in 2026. Track official IRS updates, but you can tentatively model using $130,000 to gauge potential outcomes now.

4) Estate and gift planning signals.

Coverage surrounding OBBB highlights a $15 million per-person federal estate tax exemption (double for married couples).

For globally mobile families, that’s a major lever for cross-border wealth planning, especially when combined with local estate/inheritance regimes.

Keep in mind “permanent” in U.S. tax law is always subject to future Congresses.

Section 899—the expat-adjacent wildcard

If you’ve heard about Section 899 in the OBBB debate, you’re not alone.

Early commentary framed it as a “revenge tax” tool aimed at countries imposing “unfair” levies (for example, digital services taxes), with potential collateral effects across cross-border tax positions.

Some expat-focused sources suggested that Section 899 was shelved; however, Senate materials indicated the draft retained a modified Section 899 at one point in the process.

Translation: this piece has been fluid, and the final contours matter for multinational employers, investors abroad, and certain cross-ownership structures that can catch expats’ portfolios in the crossfire.

For the average salaried expat using FEIE and/or FTC, Section 899 is unlikely to change day-to-day filing mechanics.

But if you hold interests in foreign entities or invest in markets targeted by 899-style rules, keep an eye on final text and IRS guidance from late 2025 into 2026.

Interaction with residence-based taxation (RBT) proposals

In parallel to OBBB, lawmakers have floated residence-based taxation ideas—most notably Rep. Darin LaHood’s proposal—to let certain U.S. citizens abroad elect out of worldwide income taxation.

That’s separate from OBBB but highly relevant to expats’ long-term futures. Advocacy groups expect multiple paths for RBT or RBT-like relief to ride in a bipartisan package later in 2025, especially items that fell afoul of Senate rules during OBBB’s passage.

Until anything is enacted, you remain under citizenship-based taxation with the familiar FEIE/FTC toolkit.

Practical planning for the 2025 tax year (filed in 2026)

Decide early between FEIE vs. FTC (or a blend).

With a likely $130,000 FEIE ceiling, mid-career earners in moderate-tax countries may still favor FEIE.

In higher-tax countries (think much higher marginal rates or substantial social charges), the foreign tax credit often yields a better outcome—and once you exclude income under FEIE, you cannot claim FTC on that excluded income.

Run both scenarios for 2025 now to avoid surprises come April/June 2026.

Model the “permanence” of rates conservatively.

Locking in rate brackets and larger deductions reduces the whiplash expats have faced since 2017. But policy risk never vanishes.

If you’re timing sales of appreciated foreign assets, exercising stock options, or repatriating cash, plan assuming today’s rules apply—while stress-testing against less favorable brackets in the out-years.

Mind estate and gift moves across borders.

If you’re a high-net-worth expat, a $15M exemption is planning gold—but local rules (forced heirship, inheritance tax, gift reporting) can override or complicate the U.S. result.

Coordinate a U.S. estate attorney with local counsel before you shift shares, recapitalize a family company, or gift non-U.S. situs assets to children abroad.

Watch for technical guidance.

Expect IRS notices and forms updates implementing OBBB’s many subtitles. These will clarify how new deductions, definitions, and interactions apply to nonresident taxpayers and those claiming international provisions.

Keep an eye on IRS international pages and your software provider’s 2025 forms roadmap.

If you have foreign business interests, track Section 899 outcomes.

Portfolio stakes in foreign corporations, private funds, or operating businesses in jurisdictions targeted by “unfair tax” designations could face new frictions.

Before year-end 2025, get your CPA to screen entity charts and foreign withholding assumptions against the latest 899 status.

Filing logistics that still trip up expats

• Deadlines: The automatic expat extension to June 15 still applies, with additional extension to October 15 (and often to December 15 upon request). OBBB hasn’t changed these mechanics, but any new forms could create prep bottlenecks—don’t wait. (General IRS practice; verify each year with IRS.)
• Banking/reporting: OBBB doesn’t replace FBAR or FATCA Form 8938. High balances or foreign pensions can still trigger reporting—stay compliant to avoid penalties. (IRS international guidance remains in force.)
• Child/family benefits: Changes to U.S. child or dependent benefits under OBBB may flow to expats but often with SSN, earned-income, or residence conditions. If you relied on the Child Tax Credit in prior years, confirm the 2025 rules early with your preparer.

Bottom line

For U.S. expats, OBBB is less a revolution than a refinement: steadier rate structures, incremental deductions, and a higher FEIE (if and as finalized) combine to make year-to-year planning more predictable.

The potential outsize movers—the fate of Section 899 and any breakthrough on residence-based taxation—sit largely adjacent to OBBB and could reshape the landscape further if they advance.

Until then, the classic expat toolbox (FEIE vs. FTC, treaty analysis, entity hygiene, and vigilant reporting) remains your best friend.

If you do nothing else this fall, do these three things: (1) simulate FEIE vs. FTC under 2025 assumptions, (2) review your estate plan in light of higher exemptions and local rules, and (3) ask your advisor specifically about Section 899 exposure and any late-2025 IRS guidance.

That 90-minute exercise can easily save you four or five figures—and a lot of April heartache.