Trump’s Big Beautiful Bill Passed: What US Expats Need to Know

The Big Beautiful Bill is no longer just a headline or political soundbite, it’s now law. Passed in July 2025, the One Big Beautiful Bill Act ushers in some of the most sweeping tax changes since the 2017 Tax Cuts and Jobs Act. While the bill covers everything from spending caps to energy policy, it includes several provisions with major implications for Americans living abroad.

From a new surtax on foreign income to stricter reporting rules, limitations on the Foreign Tax Credit (FTC), and adjustments to key credits like the Child Tax Credit, the Big Beautiful Bill reshapes how Americans abroad will file their US taxes in 2026. Here’s a breakdown of the most important changes for US expats and what you should do next.

1. New Foreign Income Surtax and Limits on the Foreign Tax Credit

Section 899 of the law introduces a new surtax on income earned in countries the US government deems “unfair” or discriminatory tax systems. The Foreign Tax Credit (FTC) still exists, but lawmakers now limit its application against this surtax.

The surtax ranges from 5% to 20% and applies to certain foreign corporations and business entities with US-connected foreign income in flagged jurisdictions. Countries like France, Germany, Canada, and the UK may be subject to scrutiny under these new rules.

Why this matters if you claim the FTC: If you live in a high-tax country and rely on the FTC to reduce your US tax bill, you may now owe additional tax that the FTC won’t cover. US expats earning US-connected income through foreign companies should pay close attention to whether their host country falls under these “unfair” classifications.

2. Stricter Reporting Rules and Heavier Penalties

US expats are no strangers to complex filing requirements, but the new law expands financial asset reporting obligations. Lowering thresholds for the Foreign Account Tax Compliance Act (FATCA) and the Report of Foreign Bank and Financial Accounts (FBAR) disclosures may trigger more filing requirements for expats who previously didn’t meet the thresholds. While no new thresholds have been officially announced, as of July 2025, the new law allows for them to be lowered.

The law also accelerates some filing deadlines and reduces extension periods for certain international forms. Lawmakers have increased penalties for noncompliance across the board, particularly for unreported foreign accounts, gifts, and inheritances.

Self-employed expats will also face more scrutiny, with potential limitations on Section 179 depreciation and deductions related to small foreign-based businesses.

Impact on US expat reporting: If you manage foreign accounts, receive overseas gifts, or run a business abroad, expect to file more forms with tighter deadlines and steeper penalties if you miss them.

Big Beautiful Bill Child Tax Credit Changes: One Parent SSN Rule Now Applies

The Child Tax Credit (CTC) has been increased from $2,000 to $2,500 per child. However, the income thresholds to qualify for the full credit remain high, which is good news for many US expat families.

The biggest change for expats is that at least one parent on a joint return now needs a valid US Social Security Number (SSN) to claim the refundable portion of the CTC. The previous version of this bill required that both parents need SSNs, which can be tricky for those married to non-US citizens. This update provides meaningful relief to mixed-status households, where one parent may not be a US citizen or may lack an SSN.

Children must still have valid US SSNs to qualify; ITINs are not accepted for the Child Tax Credit, which has always been the case.

Why this matters for US expat families: If your spouse doesn’t have a US SSN but you do, and you file jointly, you can still qualify for the full refundable Child Tax Credit.

4. Lower Gift and Inheritance Reporting Thresholds

US citizens receiving gifts or inheritances from foreign individuals must currently file Form 3520 if the amount exceeds $100,000. The new law lowers this threshold significantly (exact amount TBD), which means more expats will need to file this complex form.

Gifts from foreign entities like corporations or partnerships, currently reportable over $18,567, will also trigger reporting at lower thresholds.

Bottom line for US expats: While you generally won’t owe tax on what you receive, the reporting requirements are getting tougher. If you expect to receive money or assets from foreign individuals or entities, be prepared to report more often, even for smaller amounts. Filing Form 3520 correctly and on time is now more important than ever to avoid steep penalties.

5. Stricter Verification for US Benefits and Healthcare Access

The new law tightens documentation rules for US citizens accessing federal benefits. This includes healthcare programs like Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and the Affordable Care Act (ACA).

While this doesn’t directly impact taxes, it could affect Americans abroad who rely on or occasionally access US healthcare or benefit programs.

What it means for US expats: If you or your family maintain ties to US benefit programs while living abroad, you may need to provide more documentation to prove eligibility. These changes could lead to delays or denials, especially for mixed-status families or those with limited physical presence in the US.

6. Potential Conflict with Tax Treaties

Though the Big Beautiful Bill doesn’t directly amend or revoke existing tax treaties, it introduces new policies, like the foreign income surtax and expanded reporting rules, that may conflict with existing treaty protections. These provisions could be seen as overriding or circumventing certain treaty benefits, especially those that shield income from double taxation.

This uncertainty affects US expats who rely on treaties to avoid being taxed twice on the same income. Provisions that were once straightforward may now require additional interpretation, documentation, or justification during IRS review.

What you can do: Treaty benefits still exist, but claiming them may become more complex. US expats should expect more paperwork and tighter IRS scrutiny when relying on tax treaty provisions. If you’re unsure how your treaty applies under the new rules, a trusted Tax Professional like MyExpatTaxes, specializing in the unique tax needs of Americans living abroad, can help you interpret the terms and stay compliant.

7. SALT Deduction Cap Repealed for State-Filing Expats

Many US expats maintain tax ties to a state through property ownership, voter registration, dependents, or even a state driver’s license. For those who are still required to file a state return, the cap on state and local tax (SALT) deductions has been a costly limitation since it was introduced in 2018.

The Big Beautiful Bill officially repeals that cap, lifting the deduction from $10,000 to $40,000. However, this higher deduction is only available to taxpayers with Adjusted Gross Income (AGI) under $250,000 (if filing separately), or AGI under $500,000 (if married filing jointly). This change provides meaningful relief to expats who continue to pay state income tax in high-tax jurisdictions like New York or California. It may also benefit partial-year filers or those in gray areas of residency by lowering their overall liability.

How to make the most of it: If you’re an American abroad who still files a state return, you can now deduct more of your state taxes. This could reduce your overall US tax burden. However, the exact benefit depends on how your state defines tax residency and applies deductions. Review your state’s rules carefully, and consider consulting with a Tax Professional like MyExpatTaxes to evaluate your eligibility and filing position under the new law.

What You Should Do Now

With the law now in place and taking effect in 2026 for your 2025 tax return, it’s time to get proactive. Here’s how to stay ahead:

• Review your tax residency and income sources
• Check whether you rely on the FTC or FEIE
• Verify that your dependents and at least one parent have valid US SSNs
• Organize records for foreign accounts, gifts, and inheritances
• Consult a Tax Professional experienced in expat tax law like MyExpatTaxes

Plan Ahead for Trump’s Big Beautiful Bill Changes

Trump’s Big Beautiful Bill has passed, and it’s bringing major changes for US expats. From new taxes to increased paperwork and shifting benefits eligibility, the 2025 tax year will require more planning and precision than ever before.

Get ahead of Trump’s Big Beautiful Bill with MyExpatPlanning. Specifically designed for US expats, it helps you organize income, documents, and plan for life changes that impact your taxes. Map out your year early, track deadlines, prepare for credits and exclusions, and estimate what you may owe — all in one place.

For clarity, compliance, and confidence, work with a trusted Tax Professional like MyExpatTaxes, who specializes in tax preparation for Americans living abroad. Our platform and team are here to help expats understand the changing US tax rules. We make it quick, accurate, and stress-free.