What concerns of US expats does the One Big Beautiful Bill Act not address?
Based on the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025, here are the key issues that the legislation does NOT address:
Fundamental expat tax system issues
Citizenship-based taxation remains unchanged
The OBBBA does not shift toward residence-based taxation; US citizens abroad still must pay taxes on worldwide income regardless of where they live, and no relief from the burden of being taxed by both the US and their country of residence.
Tax credit and investment income issues
Foreign Tax Credit (FTC) limitations with net investment income tax (NIIT)
- The 3.8% Net Investment Income Tax cannot be offset by Foreign Tax Credits, creating double taxation on investment income for expats.
- High-earning expats face the NIIT on investment income even when they've already paid foreign taxes on the same income.
- No coordination between the FTC system and NIIT, leaving expats unable to use foreign tax payments to reduce this additional US tax burden.
Compliance and administrative burdens
Complex reporting requirements continue
- Foreign Bank Account Report (FBAR) requirements remain unchanged.
- Foreign Account Tax Compliance Act (FATCA) obligations continue.
- No simplification of the time-consuming compliance process.
Foreign Earned Income Exclusion (FEIE) limitations
- The $130,000 FEIE limit for 2025 remains unchanged.
- No expansion of exclusions for higher-earning expats.
- No modifications to make the FEIE more accessible or comprehensive.
Practical implementation gaps
- Limited Applicability Abroad: The Fair Labor Standards Act (FLSA) primarily governs US-based employment, creating uncertainty for expats working abroad. Treasury's list of qualifying tipped occupations will likely focus on US service industries, potentially excluding foreign tipping customs. Foreign employers may struggle with unfamiliar US reporting requirements.
- Self-Employment Exclusions: Self-employed Americans abroad generally cannot benefit from these deductions. No provisions for the growing population of digital nomads and location-independent workers.
Broader structural issues
Temporary relief only
Both deductions expire after 2028, providing no long-term solutions and no permanent reforms to address ongoing expat tax challenges.
State tax complications
- The federal deductions don't affect state or local tax obligations.
- No coordination with the various state tax treatment of expat income.
Key takeaway
While certain tax-saving provisions may provide some relief for qualifying expats, the OBBBA fails to address the fundamental challenges facing American expats. The legislation maintains the status quo on the most burdensome aspects of expat taxation while providing only limited, temporary relief that may not even apply to many Americans living abroad.
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