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Reed Amendment

Reed Amendment

Published on January 07, 2026

Table of Contents

What is the Reed Amendment?

The Reed Amendment is a US immigration law that states a former US citizen may be denied entry to the US if they renounced citizenship specifically to avoid taxes.

It has barely been enforced in the 27 years since it was created, because the government doesn’t have a workable way to determine someone’s “tax-avoidance motive.” For most Americans abroad, it’s more of a legend than a real barrier.

Why do US expats hear about it when considering renunciation?

The Reed Amendment lives in INA §212(a)(10)(E) or simply, under US immigration law. It states that a former US citizen may be barred from entering the US if the Attorney General (now DHS) decides that the person renounced US citizenship for the purpose of avoiding taxation.

Sounds dramatic, right? The idea of being barred from visiting family scares a lot of expats.

But here’s the nuance:

  • It is an immigration rule, not a tax rule.
  • It has nothing to do with the exit tax or Form 8854.
  • And crucially, no US agency has the tools to enforce it properly.

The IRS cannot legally share your private tax records with immigration officers just to determine your motives. The Department of Homeland Security (DHS) has openly acknowledged this problem.

Does the Reed Amendment still apply in 2026 for US citizens living overseas?

Yes, it’s still on the books. But it doesn’t operate like tax brackets or FEIE limits; there is no “2026 update” because it’s not tied to tax years.

The law hasn’t been expanded, rewritten, or given new enforcement rules. It’s static legislation that has barely moved since 1996.

If you’re seeing chatter about yearly changes, it’s usually because expats mix up the Reed Amendment with the annual IRS exit tax thresholds. Different systems. Different purposes.

How is the Reed Amendment supposed to work for former US citizens who live outside the US?

In theory, DHS (not the IRS) must decide whether you renounced with the goal of avoiding tax.

In reality, DHS itself has admitted it cannot determine someone’s motive because:

  • IRS confidentiality rules prevent sharing tax information, and
  • There are no implementing regulations.

A DHS report to Congress (2015) explained that:

  • They cannot access IRS tax data.
  • They cannot reliably infer motive from travel, finances, or timing.
  • They considered some workarounds and rejected all as unworkable.
  • From 2002–2015, only two cases were denied entry, and both individuals voluntarily admitted they renounced to avoid taxes.
  • There has been no newer guidance, no new enforcement tools, and no wave of blocked travelers since then.

Without regulations, the machinery just… never got built. So the law exists, but the process that makes it usable doesn’t.

Have Reed Amendment questions? Don’t wait—reach out today for guidance.

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Can a US expat who renounces actually be barred from visiting the US later?

Technically, yes—it is possible. Practically, almost no one is seeing consequences.

To be barred, DHS must issue a formal finding that you personally renounced for tax-avoidance purposes. And since DHS has no method to determine motive, the only real pathway is a person openly admitting:

“I renounced to avoid US taxes.”

That’s it. That’s the historical pattern. There’s no system in place that automatically cross-checks Form 8854, net worth, or exit tax data and turns it into an immigration bar.

Many renunciants (including “covered expatriates”) travel back to the US without issue.

Does being a “covered expatriate” increase your risk under the Reed Amendment?

No. Covered expatriate status is an IRS determination, based on:

  • average tax liability over five years,
  • net worth of US$2 million or more, or
  • failure to certify compliance.

None of these automatically imply tax-avoidance motives.

The IRS uses objective measurements, not psychological intent. The Reed Amendment uses a subjective motive standard, which DHS cannot evaluate.

So, being a covered expatriate is not the same thing as renouncing to avoid tax.

What does the Reed Amendment really mean for US expats thinking about renouncing their citizenship?

Mostly, it means confronting a lot of noise online.

Expats tend to imagine worst-case scenarios like being stopped at the airport, losing access to family, or being punished for wanting a simpler tax life. The law’s wording doesn’t help, and neither do sensational headlines.

In practice:

  • You still file Form 8854.
  • You still settle your exit tax (if applicable).
  • You still book travel to the US under the same rules as any foreign passport holder.

And there is no active system scanning renunciants to determine their motives.

Should US expats living abroad be worried about the Reed Amendment in 2026?

Generally, no. Concern is understandable, but the evidence simply doesn’t support widespread enforcement.

However, each renunciation story is personal. Some people have complex financial histories. Some have cross-border assets that trigger exit tax rules. And yes, some prefer reassurance before taking a big step like giving up citizenship.

If you’re nervous, you’re not alone. The key is obtaining accurate guidance, not relying on internet folklore.

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2025 US Expats Filing Guide

Complete US Tax Guide for US Citizens Living Abroad: Filing Your 2025 Tax Return

If you’re a US citizen or Green Card holder living outside the US in 2026, you’ll likely need to file a US tax return.

The good news? Although the US taxes worldwide income, most people abroad don’t end up paying any US tax at all. With the right exclusions and credits in place, double taxation is rare — and that’s exactly what we help you avoid.

Written By: Clark Stott
Published On: December 18, 2025
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Let’s go through the key questions most expats ask, one at a time.

Do US expats need to file a return for tax year 2025?

Yes. If your worldwide income for 2025 is above the IRS filing thresholds, you must file a US tax return in 2026 even if you live abroad. The 2025 tax year thresholds are:

  • US$15,750 for single filers
  • US$31,500 for married filing jointly
  • US$23,625 for head of household
  • US$5 for married filing separately with a foreign spouse
  • US$400 for self-employed

These thresholds rise slightly every year with inflation. Many expats end up needing to file without realizing it, especially if their foreign salary converts to a higher amount in US dollars.

What life situations change how you file as an expat?

Moving abroad doesn’t just change where you live; it can also change how your US taxes work. A lot of expats assume their setup is straightforward, but some scenarios can shift your filing requirements, such as:

  • A mid-year move
  • Working remotely for a US employer
  • Being married to a non-US spouse
  • Moving to a high/low tax country

Each situation affects your taxes differently, so it helps to understand your category early. That way, you avoid mistakes and claim the benefits you’re entitled to.

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What IRS forms do expats usually need?

Federal tax forms get more complex once you move abroad. Once you live overseas, the IRS may require more forms than a typical US tax return. Most expats who will file in 2026 will work with a mix of:

Other expats with foreign assets or business interests will be required to file additional forms, like:

You won’t need all of these, but identifying the forms that apply to you is essential. Missing one can lead to significant penalties.

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How can US expats avoid double taxation?

Most expats worry about being taxed twice and for good reason. Fortunately, three major tools exist to protect you in the 2025 tax year:

  1. Foreign Earned Income Exclusion (FEIE): up to US$130,000 excluded
  2. Foreign Housing Exclusion: up to US$39,000 in qualified expenses
  3. Foreign Tax Credit: dollar-for-dollar credit for foreign income taxes

No single option fits every expat. The right choice usually comes down to two factors:

  1. How your country taxes income, and
  2. The type of income you earn.

Each path leads to a different strategy. The full guide walks through each scenario more slowly.

Do self-employed expats still pay US taxes?

Yes. Self-employed expats generally owe US self-employment tax at a rate of 15.3% unless they live in a country that has a Social Security agreement (a ‘totalization agreement’) with the US.

If you run a business abroad, work as a contractor, or operate a foreign company, the rules shift again.

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Have another tax question in mind? Contact us now with your message.

What are the deadlines for filing 2025 US taxes?

Expats get extra time automatically:

  • March 15, 2026: 3520 and 520-A foreign trust filing deadline
  • April 15, 2026: standard deadline
  • June 15, 2026: automatic extension for expats
  • October 15, 2026: extension with Form 4868
  • October 15, 2026: FBAR deadline

These dates may seem straightforward, but they become more important if you’re qualifying for FEIE or catching up on old returns.

What income must expats report to the IRS?

Even while living overseas, you must report all types of income to the IRS, including:

  • Foreign pensions and superannuation
  • Rental income
  • Dividends and interest
  • Crypto transactions
  • Sale of foreign property
  • Equity compensation

Unexpected tax obligations often come from these income types, especially when foreign pensions or property sales are involved.

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What credits and deductions can expats claim in 2025?

Expats can still claim major US tax benefits, including:

💡 This is the only credit that can put real money back in an expat’s pocket, even with zero tax due.

  • Dependent Care Credit
  • Education credits (for eligible foreign schools)
  • IRA contributions

Credits can be tricky when FEIE is involved, so the downloadable version includes examples showing what happens when you mix the two.

What can’t you claim on your 2025 tax return?

Several credits and relief programs are no longer available for the 2025 tax year, including:

  • COVID-19 stimulus payments (EIP & Recovery Rebate Credits)
  • 2020 and 2021 Recovery Rebate Credits (final claim windows have closed)
  • Pandemic-era relief programs that expired in previous years
  • Deductions or exclusions that sunsetted before 2025, unless Congress renews them
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What happens if you don’t file as an expat?

Penalties for missing returns or foreign reporting forms add up fast (reaching up to US$50,000), even if you owe US$0 in tax. Forms like FBAR and FATCA come with some of the highest penalties in the US tax system.

If you’re behind, the Streamlined Filing program lets expats file past years and avoid harsh penalties as long as the mistakes were non-willful.

What income must expats report to the IRS?

Even while living overseas, you must report all types of income to the IRS, including:

  • Foreign pensions and superannuation
  • Rental income
  • Dividends and interest
  • Crypto transactions
  • Sale of foreign property
  • Equity compensation

Unexpected tax obligations often come from these income types, especially when foreign pensions or property sales are involved.

Want the complete guide? Download your PDF here

The full 2025 US Expats Filing Guide includes deeper explanations, clearer examples, strategy comparisons, and step-by-step walkthroughs designed specifically for Americans living abroad.

Download the complete PDF to make your 2026 filing season much easier and avoid expensive mistakes.

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Self-employment tax

Self-employment tax

Published on November 27, 2025

Published by

Clark Stott

Table of Contents

For the 2025 tax year, you will be required to report and pay self-employment tax if your earnings reach US$400 or more, including your foreign self-employment income.

What every self-employed American abroad should know

Self-employment tax covers your contributions to Social Security (12.4%) and Medicare (2.9%), totaling 15.3%. It’s what regular US employees see withheld from their paychecks, except that self-employed people pay both halves.

Here’s a quick look at the 2025 US self-employment tax rates and thresholds:

Key fact

2025 figure

Rate

15.3% (12.4% Social Security + 2.9% Medicare)

Wage base

US$176,100

Threshold

US$400 in net earnings

Applies to

US citizens or residents with self-employment income

Main forms

Schedule C + Schedule SE (Form 1040)

Even if you use the Foreign Earned Income Exclusion (Form 2555) to exclude part of your income from US income tax, you’ll still owe self-employment tax. The two are completely separate; FEIE affects income tax, not Social Security or Medicare contributions.

What counts as self-employment for US expats

If you decide what services you offer, how you deliver them, and who you work with, you’re likely self-employed. That includes:

  • Freelancers or contractors who invoice clients directly
  • Consultants offering professional services
  • Digital nomads earning remotely while traveling
  • Online business owners managing their own e-commerce or content platforms

Employees, on the other hand, share the tax burden with their employer (7.65% each). But if you’re self-employed, you wear both hats, which means you’re the boss and the employee, so you owe the complete 15.3%.

To make things fair, the IRS lets you claim the “employer half” (7.65%) as a business deduction. It doesn’t reduce your self-employment tax directly, but it lowers your adjusted gross income (AGI), which can reduce how much regular income tax you owe.

For example:

If you earn US$80,000 freelancing from London, you’ll first multiply that by 0.9235, leaving about US$73,880 subject to the 15.3% self-employment tax—roughly US$9,430 owed.
You can then deduct half (about US$4,715) on Schedule 1 to lower your adjusted gross income.

So yes, you shoulder the full tax rate, but that deduction helps even the playing field. Let’s look at how the overall self-employment tax system works in 2025.

2025 self-employment tax rates and limits

Self-employment tax mimics the US payroll system, which funds Social Security and Medicare. The rates for 2025 haven’t changed, but the Social Security wage base increased to US$176,100—up from US$168,600 in 2024. That means you’ll contribute Social Security tax on slightly more income before the cap kicks in.

Component

Rate

2025 limit

Applies to

Social Security (OASDI)

12.4%

US$176,100

Net earnings up to US$176,100

Medicare (HI)

2.9%

None

All net earnings

Additional Medicare Tax

0.9%

Over US$200K (single) / US$250K (joint)

High earners only

To figure out your self-employment tax, start with your net profit, then multiply it by 0.9235. The IRS uses this step to remove the “employer-equivalent” portion before applying the 15.3% tax rate.

Example:

US$60,000 × 0.9235 × 15.3% = US$8,478

The Social Security portion stops once you hit US$176,100, but Medicare continues indefinitely and adds an extra 0.9% once your income passes the high-earner threshold.

Have self-employment income? Contact us today to manage your tax obligations.

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Filing requirements for self-employed expats

If you earn US$400 or more in net self-employment income, you must file a US tax return, even if you live entirely outside the country. Here’s what that looks like:

  • Schedule C (Form 1040): lists your business income and expenses.
  • Schedule SE (Form 1040): calculates your self-employment tax.
  • Form 1040 or 1040-SR:  your main tax return.

You’ll also deduct half of your self-employment tax on Schedule 1 (Form 1040), line 15.
The self-employment tax itself is reported on Schedule 2 (Form 1040), line 4, and then carried over to your main Form 1040.

If you run your business through a foreign corporation or partnership, it gets more complex because the IRS wants visibility into overseas business structures. You might need to report:

Important! Missing these forms can cost thousands in penalties, so getting help from a CPA who understands international filings is a wise move.

Totalization agreements and when you’re exempt

There’s one major exception: some expats don’t owe US self-employment tax at all, thanks to international totalization agreements.

The US has totalization agreements with several countries to prevent double social security coverage. If your host country has one and you pay into that country’s system, you’re exempt from US self-employment tax. If not, you’re stuck paying both.

The following countries have social security (totalization) agreements with the US as of the 2025 tax year. If you’re contributing to one of these systems, you may be exempt from US self-employment tax.

  • Australia
  • Austria
  • Belgium
  • Brazil
  • Canada
  • Chile
  • Czech Republic
  • Denmark
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Iceland
  • Ireland
  • Italy
  • Japan
  • Luxembourg
  • Netherlands
  • Norway
  • Poland
  • Portugal
  • Slovak Republic
  • Slovenia
  • South Korea
  • Spain
  • Sweden
  • Switzerland
  • United Kingdom
  • Uruguay

How to pay and plan ahead

Unlike traditional employees, no one withholds taxes for you. You’re both the boss and the payroll department, so it’s your job to pay the IRS throughout the year.

Most self-employed expats use quarterly estimated tax payments via Form 1040-ES. The 2025 due dates are:

  • April 15, 2025
  • June 16, 2025 (moved because June 15 is a Sunday)
  • September 15, 2025
  • January 15, 2026

If you live abroad full-time, you get an automatic two-month extension to file and pay until June 16, 2025 (since the 15th is a Sunday).

Many expats set aside 25-30% of each payment for combined income and self-employment tax. A good rule of thumb is to treat tax savings as a business expense.

Keep in mind: Interest starts accruing after April 15 on any unpaid balance, even though you have until June 16, 2025 to file without penalties. So filing later doesn’t mean delaying payment interest-free.

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If you renounce US citizenship, can you still visit the US?

If you renounce US citizenship,
can you still visit the US?

 

Published on November 12, 2025

Published by

Clark Stott

Table of Contents

Let’s clear this up once and for all—yes, you can visit the US after renouncing your citizenship, but you’ll need official permission, just like any other foreign traveler. That means you’ll need to follow the same visa or travel authorization rules imposed for non-US citizens.

In this guide, we’ll look at what changes once you renounce, how the visa process works, and the common issues former Americans can face when trying to re-enter the country.

What happens when you renounce US citizenship?

Renouncing your citizenship formally ends your legal ties with the United States. From that point on, you lose the rights tied to being an American, including the automatic freedom to live, work, or enter the country.

Once the US Department of State issues your Certificate of Loss of Nationality (CLN), you’re treated as a foreign national under immigration law. You’ll now need permission to visit, just like any visitor from the UK or Canada.

It’s also worth remembering that renouncing doesn’t erase your past tax obligations. In the final year of your US citizenship, you will need to file your US taxes for that year and submit Form 8854, the Initial and Annual Expatriation Statement. This is the official way of closing your responsibilities with the IRS.

Can you still visit the US after renouncing citizenship?

Yes, but it’s no longer automatic. After renunciation, you’re viewed like any other visitor to the US. That means you’ll need to apply for a visa or qualify under the Visa Waiver Program (VWP) if your new nationality allows it.

If your new citizenship is from a VWP country (like the UK, Germany, or Japan), you can usually enter for up to 90 days without a visa by applying for ESTA online. But ESTA approval isn’t guaranteed. It’s only a travel authorization that allows you to board your flight, not a guaranteed entry into the US. Think of ESTA as your boarding pass, not your entry ticket.

For everyone else, or for stays longer than 90 days, you’ll need to apply for a visa. And yes, that includes short family visits, business meetings, or tourism.

What visa do you need to visit the US after renouncing citizenship?

It will usually depend on your reason for the visit. Here’s a quick summary:

Purpose

Visa type

Typical validity

Notes

Tourism or business

B-1/B-2

Up to 10 years (multiple entries)

Most common for former US citizens

Academic study

F-1

Duration of study

Must register under SEVIS

Exchange programs

J-1

Program-based

May require a return-home clause

Work or employment

H-1B, O-1, L-1

Employer-sponsored

Requires petition approval

If you’re unsure which one fits your situation, think about your main goal: are you visiting, studying, or working? Each path has its own paperwork and wait times.

What is the process for getting a US visa after renunciation?

Don’t worry, it’s simpler than it looks. Here’s what the general process looks like for most applicants:

  1. Complete Form DS-160 online: Include accurate personal details and travel plans.
  2. Pay the visa fee: As of 2025, the visa fee for most visitor visas (B-1/B-2) is US$185, while petition-based work visas (H-1B/L-1/O-1) cost US$205.
  3. Schedule your embassy or consulate interview: Wait times vary by country, with big cities like London taking weeks.
  4. Prepare your documents: Bring your passport, DS-160 confirmation, visa fee receipt, photo, and proof of strong ties to your home country (like employment or property).
  5. Attend your interview and provide biometrics: Expect questions about why you’re visiting, your travel history, and sometimes your reason for renunciation.
  6. Wait for visa approval or administrative review: Processing can take from a few days to a few weeks.

Most former citizens are approved if they’re honest about their reasons for travel and clearly settled abroad. The process can become complicated for those who have recently renounced or still owe US taxes.

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Can you be denied entry even with a valid visa?

Yes, that’s possible. A valid visa only allows you to travel to a US airport or border crossing; it doesn’t guarantee you’ll be allowed in. The Customs and Border Protection (CBP) officers you meet on arrival have the final say on whether you can enter.

They might deny entry if:

  • Your answers at the border don’t match your visa type.
  • They suspect you intend to overstay.
  • Your previous renunciation was flagged as tax-motivated (see below).
  • You’re from a country under travel restrictions or sanctions.

The Reed Amendment

There’s a controversial law called the Reed Amendment (8 U.S.C. § 1182(a)(10)(E)), which technically allows the US to deny entry to anyone who renounced citizenship for tax-avoidance reasons.

In practice, DHS rarely enforces this law because immigration authorities have limited access to IRS records that would prove someone’s motive for renunciation.

However, as of 2025, “covered expatriates” (those whose net worth exceeds US$2 million, or whose average tax liability over five years exceeds US$206,000) might still face added scrutiny during visa processing.

So while the risk of being formally barred is small, it’s not zero.

How can you strengthen your chances of visa approval?

There’s no secret formula, but these steps can make a difference:

  • Be transparent about your reason for visiting. Avoid vague or evasive answers.
  • Show strong ties to your current country (job contracts, property, family, education)
  • Travel with proof of your return plans (like a round-trip ticket).
  • Bring your CLN if asked. It helps clarify your renunciation status and avoid confusion.

What about dual citizens or ESTA travelers?

If you now hold a passport from a Visa Waiver Program (VWP) country, you can usually travel visa-free with ESTA approval. That covers short visits (up to 90 days) for tourism, family, or business meetings.

But note:

  • ESTA applications are processed automatically through a database check, but approval isn’t guaranteed. You can still be denied at the airport.
  • You must apply before boarding your US-bound flight.
  • You can’t extend or change your status while in the US under ESTA.

If your new citizenship isn’t part of the VWP, you’ll always need a traditional visa.

Can you ever regain US citizenship after renouncing?

Technically, yes—but it’s extremely rare. Once you renounce, it’s treated as a permanent, voluntary act. The only path back is to immigrate again through the normal process: first by obtaining a Green Card, then later applying for naturalization.

There have been rare instances when someone has proven they renounced under duress or due to a mistake, but these are exceptional cases that take years to resolve.

So in practice, renouncing US citizenship is a one-way decision. If you change your mind, you’d need to go through the normal immigration process from scratch.

What should you keep in mind before planning a visit?

Here’s a quick checklist before booking flights:

  • Make sure your passport (from your new country) is valid for at least six months.
  • Apply for the right visa or ESTA in advance.
  • Bring your Certificate of Loss of Nationality (CLN) when traveling. It’s useful proof.
  • Double-check any country-specific bans or entry restrictions.
  • Don’t assume your renunciation will make travel easier; it often adds a few layers of admin.

FAQs

  • Can former US citizens still collect Social Security benefits after renouncing?

    Yes, in most cases. If you’ve earned enough work credits before renouncing, you can still receive Social Security payments, even while living abroad.

    However, the US Treasury can suspend payments if you move to a restricted country, like Cuba or North Korea, until you relocate somewhere eligible. And if you owe back taxes or penalties, the IRS can offset those benefits until you’re in good standing.

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Additional Child Tax Credit

Additional Child Tax Credit

Published on November 05, 2025

Published by

Clark Stott

Table of Contents

Additional Child Tax Credit: The refundable side of the CTC for expats

For many American expats, the Child Tax Credit (CTC) sounds familiar, but the Additional Child Tax Credit (ACTC) is where the real cash comes in. It’s the refundable part that can actually land money in your account, not just reduce your US tax bill.

Let’s unpack how this works in 2025, especially if you live overseas and want to claim every dollar you’re entitled to.

What is the Additional Child Tax Credit (ACTC) for 2025?

In 2025, eligible parents can claim up to US$1,700 per child as a refundable credit, meaning you can get a refund even if you owe no US tax.

To qualify for the refundable portion, your earned income must be at least US$2,500. The refund phases in at 15% of your income over that amount, capped at US$1,700 per child.

For example:

  1. Earned income: US$15,000
  2. Subtract the US$2,500 threshold: US$15,000 – US$2,500 = US$12,500
  3. Apply the 15% phase-in rate: US$12,500 × 15% = US$1,875

In other words, even though the math gives you US$1,875, the IRS limits the refundable portion to US$1,700 per qualifying child.

Bottom line: The non-refundable portion of the CTC (worth up to US$2,200 per child in 2025) reduces your tax bill but can’t trigger a refund. The ACTC, however, turns part of that into real money.

Why does the Additional Child Tax Credit work differently for expats?

The ACTC works differently for expats because the IRS bases it on how you report your foreign income. Your choice between the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC) determines whether your income counts toward refund eligibility.

If you claim the FEIE, your excluded income no longer counts as earned income for the ACTC formula. And since you need at least US$2,500 of earned income to qualify, that usually eliminates the refundable portion of the credit.

But if you use the FTC instead, your income still counts, keeping you eligible for the refund, assuming you meet the other requirements.

Let’s compare:

Example

Filing choice

Earned income counted

Refundable ACTC eligible?

Family in Australia earning US$120,000 while using FEIE

FEIE claimed

US$0 (income is excluded)

✘ No refund

Family in the UK earning US$120,000 while using FTC

FTC claimed

US$120,000 (counts as earned)

✔ Possible refund

So, even though both families earn the same income abroad, only one keeps access to the refundable credit.

That’s why many expats weigh their options: use the FEIE to avoid US tax, or the FTC to stay eligible for refundable credits like the ACTC.

How do you calculate the ACTC?

Here’s the basic 2025 formula:

Refund = 15% × (Earned Income – US$2,500) 

→ capped at US$1,700 per child

Quick example:

Details

Amount

Earned income

US$20,000

Income above threshold

US$17,500

15% of excess

US$2,625

Refund per child (cap)

US$1,700

 

Here’s how that works: you start with US$20,000 of earned income. 

The IRS ignores the initial US$2,500, the minimum income threshold you must pass before the refund starts to build. The amount above the threshold (US$17,500) is multiplied by 15%, resulting in US$2,625.

However, the refundable part of the Child Tax Credit is capped at US$1,700 per child. So even though your calculation shows US$2,625, you can’t claim more than US$1,700 for each child.

If you have two children, your total refund would be US$3,400 (US$1,700 × 2). 

If your earned income falls below US$2,500, the formula doesn’t apply; you’d receive no refundable credit at all.

Tip: Self-employed expats can count net business income as earned income, which can help them qualify even while working abroad.

See if your qualifying child can get up to $1,700 with ACTC.

CALCULATE MY REFUND NOW
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FEIE vs. FTC: Which strategy helps expats keep their ACTC refund?

The Foreign Tax Credit usually wins if your goal is to claim the refundable credit.

Think of it as a fork in the road:

  • Path 1 – FEIE: Exclude your foreign salary → no taxable income, but also no “earned income” for refund calculation.
  • Path 2 – FTC: Report income and pay foreign taxes → you may owe no US tax anyway, and your earned income still counts for the ACTC.

A quick decision guide:

Situation

Better option for ACTC

You live in a high-tax country (UK, France, Australia)

FTC – foreign taxes usually offset US tax, keeping refund eligibility

You live in a no-tax country (UAE, Qatar, Saudi Arabia)

FEIE – but you’ll likely lose the ACTC refund

You’re self-employed abroad

Depends – FEIE can block refund; FTC may be better if you pay foreign self-employment tax

Will the Additional Child Tax Credit expand again after 2025?

It’s not guaranteed. The One Big Beautiful Bill (OBBBA) bumped the Child Tax Credit to US$2,200 per child for 2025 and kept the US$1,700 refundable cap. However, many of these changes expire after 2028 unless Congress extends them.

Lawmakers have floated ideas to restore full refundability, like in 2021, when families could receive the entire credit as cash. But for now, 2025 rules remain: 15% phase-in, US$2,500 income floor, and US$1,700 max refund.

If you’re an expat planning long-term, it’s smart to watch how future laws evolve, especially if your eligibility hinges on whether your income counts as “earned.”

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What is an ITIN vs SSN

What is an ITIN vs SSN

Published on October 27, 2025

Published by

Clark Stott

Table of Contents

What is an ITIN vs SSN?

An ITIN and an SSN are both US tax identification numbers, but they serve different groups. An SSN is for US citizens and authorized workers, while an ITIN is for individuals, often expats or foreign residents, who must file US taxes but don’t qualify for an SSN.

If you’re living abroad, this can become particularly challenging. You might already have a local tax ID or residency number, but you’ll still need a US identification in order to file your US tax returns. The key is figuring out which one applies to your situation and why it matters.

What is an SSN, and who actually needs one abroad?

An SSN is a nine-digit number issued by the Social Security Administration (SSA). In the US, it’s the key to almost everything: employment, Social Security benefits, credit history, and tax filing.

You qualify for an SSN if you’re a:

  • US citizen
  • Green Card holder or
  • Visa holder authorized to work in the US

For expats, your SSN doesn’t expire or disappear just because you move overseas. You’ll still use it when filing your US tax return (Form 1040) each year, even if you also pay taxes in the country where you live.

2025 update: The SSA has rolled out digital SSN access and stronger identity-proofing requirements. That means applying or replacing a card often involves an online verification step, even for those living outside the US.

What is an ITIN and who needs it most?

An ITIN is also a nine-digit number, but it’s issued by the IRS rather than the SSA. It always starts with the number 9. You’ll need an ITIN if you’re not eligible for an SSN but still have to file U.S. taxes. Common examples include:

  • Nonresident aliens earning US income
  • Foreign spouses of American citizens
  • Dependents living outside the US
  • Investors with US rental income or other taxable assets

For US expats, this usually comes up if you’re married to a non-US spouse or claiming dependents who don’t have SSNs.

2025 update: ITINs now expire after three years of non-use. If you haven’t filed for three consecutive years, you’ll need to renew through the IRS.

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What’s the difference between an ITIN and an SSN?

An SSN serves as both a US employment ID and a tax-tracking number, while an ITIN is used only for tax purposes by individuals who aren’t eligible for an SSN.

Here’s a quick breakdown of how ITINs and SSNs differ:

Feature

SSN

ITIN

Issued by

Social Security Administration (SSA)

Internal Revenue Service (IRS)

Used for

Work, Social Security benefits, and tax filing

Tax filing only

Eligible applicants

US citizens & authorized workers

Nonresidents or dependents not eligible for SSN

Forms used

Form SS-5 (SSA)

Form W-7 (IRS)

Benefit coverage

Eligible for Social Security and Medicare

Not eligible

Expiration

Permanent

Expires after 3 years of non-use

Use abroad

Still valid for US taxes

Commonly used by expats’ spouses or dependents

Do US expats need an ITIN or an SSN?

If you’re a US citizen or a Green Card holder, you’ll always use your SSN, even while living abroad. You generally won’t need an ITIN yourself, since ITINs are meant for people who aren’t eligible for an SSN.

However, you might need to include ITINs for people connected to you, such as:

  • A non-US spouse you’re filing jointly with,
  • Dependents who live abroad and don’t qualify for SSNs, or
  • Foreign partners or investors who share US income with you.

Important! US expats can’t have both active. Once you receive an SSN, notify the IRS; they will void your ITIN and combine your records. Don’t use both!

Can I file US taxes from abroad without an SSN?

Yes. You can file with an ITIN. The IRS accepts Form 1040 with a valid ITIN attached to Form W-7, even if you’re filing from another country.

How can I get an ITIN from outside the US?

You can apply for an ITIN from abroad by following these steps:

  1. Fill out Form W-7 and attach it to your US tax return.
  2. Include proof of your foreign status, like a passport or national ID.
  3. Send your application using one of these options:
    • By mail to the IRS
    • Through an IRS-authorized Acceptance Agent (many operate internationally)
    • At a US consulate
  4. Renew your ITIN if you haven’t used it on a tax return in the last three years.

Tip: If you’re filing jointly with a non-US spouse, both of you need to sign the return and include identity documents.

How do I apply for an SSN while living abroad?

You can still get or replace an SSN from outside the US. Here’s how:

  1. Complete Form SS-5. This is the official application for a Social Security card.
  2. Gather your documents to prove:
    • Citizenship or immigration status (such as a US passport or Green Card),
    • Identity, and
    • Work authorization (if you’re not a citizen).
  3. Send your application using one of these options:
    • Nearest US Embassy, consulate
    • The SSA field office that handles Social Security services for people abroad.
  4. Wait for processing. Processing times vary by country and method; expect several weeks.

2025 update: The SSA’s new digital verification system lets some applicants confirm identity online before submitting documents.

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Support test for qualifying child

Support test for qualifying child

Published on October 22, 2025

Published by

Clark Stott

Table of Contents

Who can you really claim as your dependent? The IRS has a lot of fine print, but one rule stands out: the support test. This test decides if your child counts as your dependent. For American families abroad, the same rule applies, but proving it can be more complicated.

What is the support test for a qualifying child?

The support test means your child cannot have paid for more than half of their own living expenses during the tax year.

If your child covers more than 50% of their costs, you can’t claim them as a dependent. If you or another parent/guardian provides the majority of their support, then the child passes this test.

The IRS takes a broad view of what “support” actually covers. It’s not just the obvious expenses like food or rent. It stretches across housing, education, clothing, healthcare, transportation, and even recreation. To understand the test, it helps to break down exactly what the IRS counts as support and what it doesn’t.

What counts as support under IRS rules?

Support includes most of the basics you’d expect. The IRS lumps these into categories:

  • Housing/lodging: Rent, mortgage interest, property taxes, insurance on the home, utilities, and furniture.
  • Food: Groceries, meals, snacks (but not the value of free school lunches).
  • Clothing: Everyday clothes, shoes, and school uniforms.
  • Education: Tuition, books, supplies, and activity fees.
  • Medical and dental care: Health insurance premiums, prescriptions, doctor visits, hospital stays.
  • Transportation: Bus fares, gas, car insurance, repairs, and lease payments.
  • Recreation: Camps, lessons, sports, hobbies, entertainment.
  • Other necessities: Cell phone, internet service, and personal care, if they’re part of regular living needs.

IRS Pub 501 groups these under “total support.” So if it’s a basic living expense, it usually counts.

What doesn’t count as support?

Not every payment or benefit is treated as support. Some common items don’t make the cut:

  • Scholarships: Amounts received for tuition, fees, and supplies don’t count as the child’s own support.
  • Life insurance premiums: Premiums you pay for your own policy don’t count.
  • Future savings: Money placed into a savings account, investment, or trust fund for the child isn’t current support.
  • Government benefits: Public aid like Medicaid or housing subsidies don’t count as the child providing their own support.
  • Services: The value of services provided at no cost (e.g., free medical care, volunteer tutoring) is not supported.

The IRS is looking at what’s actually spent to cover the child’s needs, not money on paper or benefits from outside programs.

Here’s a quick breakdown of what counts as support under IRS rules:

Counts as support

Doesn’t count as support

Housing/lodging – rent, mortgage interest, property taxes, utilities, insurance, and furniture

Scholarships – amounts for tuition, fees, and supplies (even if paid to the school directly)

Food – groceries, meals, snacks (excluding free school lunches)

Life insurance premiums – premiums on your own policy or others’ policies

Clothing – everyday wear, shoes, uniforms

Future savings – money set aside in savings, investments, or trust funds

Education – tuition, books, supplies, school activity fees

Government benefits – Medicaid, housing aid, food assistance, etc.

Medical & dental care – health insurance premiums, prescriptions, doctor/hospital costs

Free services – value of volunteer or no-cost services (e.g., tutoring, medical care)

Transportation – bus/train fares, gas, insurance, car repairs, lease payments

  

Recreation – camps, lessons, hobbies, entertainment

  

Other necessities – phone, internet, personal care, if part of normal living needs

  

See if your qualifying child can get up to $1,700 with ACTC.

CALCULATE MY REFUND NOW
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How do you calculate if you provided more than half of your child’s support?

Here’s a simple way to approach it:

  1. Add up the total cost of support for the year, which includes housing, food, education, healthcare, and everything else.
  2. Work out the child’s contribution: This includes wages, savings, or income they used to pay their own expenses. Leave out scholarships.
  3. Work out your contribution: Include rent, tuition, medical bills, and groceries. Whatever you paid directly.
  4. Account for others’ contributions: like grandparents or relatives.
  5. Do the math: If your share is more than 50% of the total, you pass the support test.

For example:

Let’s say your child’s total support costs for the year come to US$25,000. This includes rent, food, school fees, medical care, and day-to-day expenses.

  • Your child’s contribution: They worked part-time in Canada and used about US$7,000 of their earnings for living costs.
  • Your contribution: From abroad, you sent monthly wire transfers that added up to US$13,000. You also directly paid for your child’s international school tuition, about US$3,000. That’s US$16,000 in total.
  • Other relatives: Grandparents in the US chipped in US$2,000 for summer camp and clothing.

Now add it all up: US$7,000 + US$16,000 + US$2,000 = US$25,000 total support.

When you calculate your share, it’s US$16,000 ÷ US$25,000 = 64%.

That means you provided well over half the support, so your child passes the support test as your qualifying child. Remember, you’d need to convert Canadian dollars into US dollars using IRS exchange rates.

Why is the support test important for claiming a dependent?

Because it decides whether your child qualifies as your dependent at all. If they fail the support test, you can’t claim them, even if they’re under 19 or a full-time student.

It also connects directly to tax benefits:

  • Child Tax Credit (worth up to US$2,200 per child): US expats can get the Additional Child Tax Credit, which is the refundable portion of the CTC (worth up to US$1,700)
  • Earned Income Tax Credit: Bigger credit if you have qualifying children, though expats generally can’t claim it.
  • Dependent Care Credit: for work-related childcare.
  • Head of Household filing status: lower tax brackets, higher standard deduction.

Bottom line: Passing the support test can be the difference between thousands of dollars in credits or nothing at all.

How does the support test apply if you live abroad?

The rules are the same for Americans abroad, but applying them takes extra effort.

  • Currency conversion: You must report expenses in US dollars, usually using the IRS annual average exchange rate.
  • Proof of support: Keep records. Wire transfers, foreign tuition invoices, medical bills, and even grocery receipts if you can.
  • Residency restrictions: To be a dependent, your child must be a US citizen, Green Card holder, US resident alien, or a resident of Canada or Mexico. A child living abroad without US status usually doesn’t qualify.
  • Custody across borders: If parents live in different countries, the tie-breaker rules still apply. Custody days come first, and if equal, the parent with the higher adjusted gross income wins the claim.

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Qualifying dependent

Qualifying dependent

Published on October 07, 2025

Published by

Clark Stott

Reviewed by

Darryl Albuquerque

Table of Contents

Not sure who counts as your dependent? You’re not alone. The IRS rules are detailed and sometimes confusing, especially if you live outside the US. Yet figuring it out is worthwhile, because claiming a dependent can change your filing status, unlock credits, and lower your tax bill.

What is a qualifying dependent?

A qualifying dependent is anyone you can claim on your US tax return. The IRS doesn’t often use the phrase “qualifying dependent,” but the meaning is the same: the person must pass certain tests.

Universal requirements for all dependents:

  • Citizenship or residency: The dependent must be a US citizen, US national, US resident alien, or a resident of Canada or Mexico.
  • Joint return rule: Dependents cannot file a joint return with a spouse, unless it’s only to claim a refund.
  • Support: They cannot provide more than half of their own financial support.
  • One-claim rule: Only one taxpayer may claim a dependent in a given year.

If someone passes these rules, the next step is to see which category they belong to. A dependent is actually the umbrella term. Underneath it, there are only two categories: qualifying child and qualifying relative.

Key takeaway: Every dependent must be classified as either a qualifying child or a qualifying relative.

How do you know if someone is a qualifying child?

A qualifying child is often your son, daughter, or a younger relative. But the IRS also looks at a few specific tests, beyond the basic rules, before deciding if someone qualifies:

  1. Relationship: The person must be your child, stepchild, foster child, sibling, or a descendant of any of these (like a grandchild, niece, or nephew).
  2. Age: They must be under 19 at the end of the year, under 24 if they are a full-time student, or any age if they are permanently and totally disabled.
  3. Residency: They must live with you for more than half the year. Temporary absences for school, medical care, or military service do not affect residency.

Example for expats:

✔ If your child lives with you in London for more than half the year, they meet the residency test and can still be claimed as your dependent.

✘ If your child lives in the US while you’re abroad, you generally can’t claim them as a qualifying child, but the person they live with may qualify instead.

See if your qualifying child can get up to $1,700 with ACTC.

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How do you know if someone is a qualifying relative?

Not everyone you support is a “child” under IRS rules. That’s where the qualifying relative category comes in. The tests are different, and they’re in addition to the general dependency requirements:

  • Not a qualifying child: They can’t already qualify as a child for you or for another taxpayer.
  • Relationship or household: They must either live with you all year as a member of your household, or be on the IRS’s list of accepted relatives (parents, grandparents, siblings, in-laws, and more).
  • Income: Their gross income must be less than US$5,050 for the tax year 2024. (US$5,200 for 2025)

Example for expats:

✔ If you send monthly transfers to cover your elderly mother’s rent and medical bills in the US, she may qualify as your dependent relative. The IRS expects documentation, so keep bank records, remittance receipts, and invoices to prove you provided more than half of her support.

✘ If your adult brother in the US earns US$15,000 a year and covers most of his own bills, you cannot claim him as a qualifying relative, even if you send him money occasionally. He does not meet the dependency tests because his income is above the US$5,050 limit for 2024, and you do not provide more than half of his support.

What’s the difference between a qualifying child and a qualifying relative?

Here’s a quick side-by-side:

Category

Key rules

Typical example

Tax benefits

Qualifying child

Must meet age limits, live with you, and have no income cap

12-year-old child

Child Tax Credit, Head of Household status

Qualifying relative

Income must be under US$5,050 (2024), and you must provide more than half of their support

Elderly parent

Other Dependent Credit, Head of Household status

Qualifying dependent

Umbrella term: must be either a qualifying child or a qualifying relative

Either of the above

Depends on the category

Why does it matter if someone qualifies as your dependent?

Claiming someone as a dependent can affect several parts of your tax return. For expats, the effect is the same, although some credits are limited overseas.

Credits available abroad:

  • Additional Child Tax Credit (ACTC): Refund of up to US$1,700 per child under 17.
  • Other Dependent Credit (ODC): Up to US$500, usually for elderly parents or older children who don’t qualify for the CTC.

Credits not available abroad:

Earned Income Tax Credit (EITC): Not available to taxpayers who live outside the US for most of the year, even if they have qualifying children.

Filing status benefits:

Having a dependent may let you file as Head of Household, which comes with lower tax rates and a higher standard deduction than filing as Single.

Deduction benefits:

Medical and dental expenses you pay for a dependent can be included in itemized deductions, even if they live abroad.

Does living abroad change who counts as a dependent?

The basic tests don’t change. The IRS rules apply to everyone, whether you live in New York or the UK. However, the outcome may differ for US expats in three areas:

  • Residency rule: A dependent must generally be a US citizen, green card holder, or resident alien. Nonresident dependents qualify only if they live in Canada or Mexico.
  • Credits: Qualifying children abroad do not make you eligible for refundable credits like the EITC.
  • Support: If your dependent lives abroad, you may need stronger proof of support, such as bank transfers, housing payments, or medical bills you paid.

Understanding these rules helps you avoid mistakes, lowers your audit risk, and keeps you from missing out on valuable tax benefits.

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Can both parents claim child as dependent

Can both parents claim child as dependent

 

Published on October 03, 2025

Published by

Clark Stott

Table of Contents

Can both parents claim the same child?

No. The IRS only lets one taxpayer claim a child per year. If both parents file separate returns and claim the same child, the IRS applies tie-breaker rules to determine who gets the tax benefits.

Normally, the parent who gets to claim the child would be the custodial parent. That’s the person the IRS will recognize. A custodial parent also unlocks most of the child-related tax benefits.

But figuring out who counts as the custodial parent isn’t always straightforward, especially when parents live apart or in different countries.

Who is considered the custodial parent?

IRS definitions state that the custodial parent is the parent the child lived with for the majority of the time during the tax year. 

This definition may differ from what family courts use. A divorce decree might grant legal custody to one parent, but if the child lived more with the other parent, the IRS will treat that parent as the custodial parent for tax purposes.

Here’s the tricky part: If a child spends the same number of nights with each parent, the IRS applies tie-breaker rules to decide who can claim the child.

How do the IRS tie-breaker rules work?

When more than one person claims the same child, the IRS uses tie breaker rules, a step-by-step priority system to decide who can claim the child.

IRS tie-breaker rules:

  1. Parent vs. non-parent: If one claimant is a parent and the other isn’t (say, a grandparent), the parent wins.
  2. Both parents: If both parents file, the IRS looks at where the child actually lived. The parent with more nights wins.
  3. Equal custody: If the child lived with each parent the exact same number of nights, the tie goes to the parent with the higher Adjusted Gross Income (AGI).
  4. Neither parent: Sometimes, no parent qualifies (maybe the child didn’t live with them long enough). In that case, the highest-income relative who can claim the child wins.

Bottom line: The IRS always prefers a parent over anyone else, then the parent with more time, then the parent with higher income. Only when no parent qualifies does another relative get a chance.

Example: If your child spends 200 nights with you in London and 165 nights with the other parent in New York, you’re the custodial parent, even if the other parent pays more expenses.

Why does this matter?

The custodial parent usually has the right to claim tax benefits tied to the child unless they release that right to the other parent.

When can a non-custodial parent claim a child?

Normally, a non-custodial parent cannot claim a child unless the custodial parent signs Form 8332 to release the dependency claim. This release may cover one year, multiple years, or remain in effect until it is revoked.

Form 8332, which is a written release the custodial parent signs, allows the non-custodial parent to claim certain credits. With this release, the non-custodial parent can claim the Child Tax Credit or Credit for Other Dependents.

However, the custodial parent always keeps the right to:

You could get $1,700 in Child Tax Credit. Try our free calculator.

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Can US expats claim their child as a dependent while abroad?

Yes. Living abroad does not prevent your child from being claimed as a dependent. The IRS applies the same qualifying child tests worldwide:

  • Citizenship: The child must be a US citizen, US national, or resident alien. Children adopted abroad can qualify if they have the proper US residency or citizenship status.
  • Relationship: Must be your child, stepchild, foster child, sibling, step-sibling, or a descendant of any of these (such as a grandchild, niece, or nephew).
  • Age: Under 19 at the end of the year, or under 24 if a full-time student for at least five months of the year, or any age if permanently and totally disabled.
  • Residency: Must live with you for more than half the year. Time abroad with the custodial parent counts toward the residency test. Exceptions exist for temporary absences.
  • Support: The child cannot have provided more than half of their own financial support during the year.

What if the second parent files a return claiming the same child?

Here’s where it gets complicated:

  • Paper-filed return: Both returns are usually processed initially. Afterward, the IRS sends notices to both parents, instructing them to resolve the issue. If they cannot, the IRS applies the tie-breaker rules.
  • E-filed return: Starting with the 2025 filing season, the IRS will accept an e-filed return even if a dependent was already claimed on another return, but only if the filer includes a valid Identity Protection PIN (IP PIN). Without the IP PIN, the IRS will reject the second electronic filing, and the taxpayer would have to file on paper.

Important! This update is specific to situations involving duplicate dependent claims. It does not mean that every “second” e-filed return automatically requires an IP PIN.

So, technically both returns might “go through,” but eventually one claim will get denied, and the tax benefits clawed back. In this instance, it’s better to sort it out earlier and amend your US tax return.

What tax benefits can expat parents claim?

Expats may claim most of the same child-related tax benefits as parents in the US, including:

  • Child Tax Credit (CTC): Worth up to US$2,200 per child under 17 in 2025. But you can claim the refundable portion (ACTC) of up to US$1,700 per child abroad. Income phase-out begins at US$200,000 (single) or US$400,000 (married filing jointly).
  • Head of Household status: Available to custodial parents abroad if they meet all requirements.
  • Credit for Other Dependents (ODC): This is available when your child doesn’t qualify for the CTC and ACTC (for example, over 17, or doesn’t have an SSN).

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What is the One Big Beautiful Bill Act?

What is the One Big Beautiful Bill Act?

Published on October 02, 2025

Published by

Clark Stott

Table of Contents

What is the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act (OBBBA) is a sweeping tax law signed on July 4, 2025. At its core, it aims to cut federal income tax burdens for certain groups like workers earning tips, employees logging overtime, and seniors on Social Security. Some provisions run through 2028, while others are set up as permanent.

For US expats, the Act matters because it reshapes deductions, credits, and reporting thresholds that could change how you file your US taxes while living abroad. Even if you’ve long relied on the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC), the OBBBA still touches parts of your return.

When did the OBBBA become law, and when does it apply?

The OBBBA officially became law on July 4, 2025. It applies retroactively to January 1, 2025, so expats will see these changes reflected in returns filed in 2026.

Many provisions, including the US$6,000 senior deduction, the tax-free status of tips and overtime, and the increased Child Tax Credit, are temporary and will expire in 2028 unless extended. That means we could be talking about another “tax cliff” in a few years.

What are the major tax changes under the OBBBA?

The Act packed in a lot, but here are the highlights most people will notice:

  • Tips and overtime pay are now exempt from federal income tax: If you’re a server or gig worker in the US, this is huge. The same goes for hourly workers pulling long shifts.
  • Seniors get a US$6,000 bonus deduction: This sits on top of the existing senior standard deduction. For many, it means Social Security income will finally be untaxed.
  • Child Tax Credit jumps from US$2,000 to US$2,200 per child: Only one parent now needs an SSN. However, children must still have valid SSNs; no more ITIN loophole.
  • SALT (state and local tax) deduction cap rises: Higher-income taxpayers who still file US state returns may benefit.
  • Small business perks expand: The Section 199A deduction climbs from 20% to 23%, and 100% bonus depreciation comes back for investments.

Some of these are broad tax cuts, others are targeted fixes. Together, they reshape how many households plan their returns.

Does the OBBBA apply to tips and overtime earned abroad?

Probably not in most cases. The OBBBA defines “qualified tips” and “qualified overtime” through US reporting systems like W-2s and 1099s, and it ties overtime rules to the Fair Labor Standards Act (FLSA). These frameworks generally don’t apply overseas unless you’re working for a US employer abroad that issues U.S. payroll forms.

So if you’re a bartender in Paris or a hotel worker in Sydney, your tips likely won’t be treated as deductible under the Act. Plus, if you’re excluding income with the FEIE, you can’t “double dip” by also claiming the tips/overtime deduction.

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How does the OBBBA affect US expats overall?

Expats won’t see as much benefit as US-based workers, but there are some wins:

  • Foreign Tax Credit (FTC) is untouched: That’s a big relief, especially since early drafts included a surtax (Section 899) that would have undermined it.
  • Child Tax Credit (CTC) increased: For 2025, the CTC rises to US$2,200 per child. The initial US$2,500 didn’t make it into the final law, but still a boost. 
  • Foreign gift and inheritance reporting hasn’t shifted: Despite speculation, the reporting threshold for Form 3520 stays at US$100,000. That’s good news if you receive smaller transfers from relatives abroad; you won’t suddenly get dragged into filing a form just for a modest gift. 
  • FBAR and FATCA thresholds are unchanged: The same US$10,000 FBAR trigger applies, along with the higher Form 8938 thresholds for those living abroad. Penalties haven’t officially increased under this Act, but the reality is that they were already harsh.

What happened to Section 899 in the One Big Beautiful Bill Act?

Section 899 was the scariest piece for expats. It would have slapped higher US tax rates on Americans living in countries with digital services taxes (DSTs), like the UK, France, Canada, Spain, and Australia.

Luckily, it never made it into the final law. The US struck a deal with G7 countries to ease DSTs, so Section 899 was cut before the Act was signed. If you live in one of those countries, that’s a massive bullet dodged.

Are there downsides to the One Big Beautiful Bill Act for US expats?

Yes. Here are the main ones:

  • Not all benefits apply overseas: The new exemptions for tips and overtime mainly apply to US jobs with US payroll reporting. Expats working for foreign employers are unlikely to qualify.
  • Some provisions may expire. The US$6,000 senior deduction, tax-free tips/overtime, and the bigger Child Tax Credit all sunset after 2028 unless extended. That uncertainty makes long-term planning trickier.
  • Foreign gifts and inheritance reporting may tighten: Some tax advisors believe the reporting threshold for foreign gifts could be lowered from US$100,000 to US$50,000, though the IRS hasn’t formally updated this yet. Expats should watch for guidance before assuming this change is locked in.
  • No fix for double taxation: The Act leaves the biggest expat issue, citizenship-based taxation, untouched. Expats must still rely on the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to avoid being taxed twice.

Bottom line: While the One Big Beautiful Bill Act eases burdens in the US, it doesn’t fix the structural issues expats face.

What should US expats do now to prepare for OBBBA changes?

Here’s a practical checklist:

  • Review your credits: Now that the Child Tax Credit is bigger, compare whether the FEIE or FTC gives you the best outcome.
  • Watch gift thresholds: Keep an eye on changes in foreign gift reporting. There is no confirmed reduction yet, but you might be expected to file Form 3520 more often.
  • Stay current with IRS guidance: The IRS hasn’t yet rolled out new forms for tips/overtime deductions, and expats need to see if foreign payroll systems will align.
  • Plan for 2028: Consider what happens if these provisions sunset and whether to restructure assets or investments before then.
  • Work with an expat tax specialist: These changes are new for everyone, including the IRS. Expert support reduces mistakes.

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