If you’re a U.S. citizen living overseas or a member of the U.S. military stationed abroad, the One Big Beautiful Bill Act (OBBBA) brings key updates to how your income, deductions, and credits will be calculated for tax year 2025 (filed in 2026).
Here’s a breakdown of what’s new, what’s permanent, and how these changes affect your situation when filing U.S. taxes from abroad.

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🧾 1. Overview: What the One Big Beautiful Bill Act (OBBBA) Does

The 2025 Reconciliation Legislation (H.R. 1), known as the One Big Beautiful Bill Act, builds on the 2017 Tax Cuts and Jobs Act (TCJA). It makes many TCJA rules permanent and introduces new short-term tax benefits for individuals and families.

At a glance:

• Keeps larger standard deductions and current tax rates.

• Eliminates personal exemptions permanently.

• Adds temporary deductions for tips and overtime pay.

• Some provisions start in 2025; others phase in by 2026.

For expats and military taxpayers, these changes may reshape your filing status, FEIE vs FTC choice, and documentation strategy.

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💰 2. Higher Standard Deduction & Adjusted Tax Brackets

For 2025:

• $15,750 for single filers and married filing separately.

• $31,500 for married filing jointly.

• $22,950 for heads of household.
  (Source: IRS Newsroom)

These inflation-adjusted increases may seem minor, but for expats who exclude foreign income under the Foreign Earned Income Exclusion (FEIE) or claim the Foreign Tax Credit (FTC), they can shift your effective U.S. taxable income — and sometimes your filing status choice.

➡️ Related Post: MFJ vs MFS — Which Filing Status Is Right for You in 2025?

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🧮 3. Permanent TCJA Rules + New Temporary Deductions

The OBBBA locks in many TCJA changes and adds some temporary new ones:

Permanent Provisions:

• No personal or dependent exemptions.

• Retained marginal tax rates (10% – 37%).

• Expanded child tax credit structure.

Temporary Deductions (2025-2028):

• Qualified tip income deduction.

• Qualified overtime deduction.

• Expanded SALT cap to $40,000 for joint filers.
  (Investopedia)

For expats and military personnel who receive overtime or tip-based pay (e.g., on-base assignments, temporary duty stations, civilian contracts abroad), these deductions can lower taxable U.S. income — even if you take the standard deduction.

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🌍 4. How OBBBA Interacts with FEIE & Foreign Tax Credit

While the One Big Beautiful Bill Act doesn’t directly modify the FEIE or FTC, its threshold increases affect how those tools work together.

• The FEIE limit for 2025 rises again with inflation (about $129,000).

• You can still combine FEIE with the Foreign Housing Exclusion and/or the FTC for maximum savings.

• New deduction limits may influence which option (FEIE vs FTC) is more beneficial.

➡️ Related Post: FEIE vs Foreign Tax Credit — How to Choose the Best Option for U.S. Expats (2025)

Pro tip: If you’re married to a non-U.S. spouse, the higher joint deduction might outweigh the exclusion benefit.
➡️ See: Married to a non US spouse? When MFJ Makes Sense — and When It Doesn’t

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🧾 5. Side Gigs & Business Income Abroad

OBBBA extends the 20% Qualified Business Income (QBI) deduction for eligible small business owners and contractors.
It also tightens oversight of digital platform income (1099-K reporting thresholds remain under review).
(Kiplinger)

For freelancers, consultants, and remote workers abroad, this means:

• You must report U.S.-source payments even if received abroad.

• Keep separate records for foreign vs U.S. clients.

• Ensure you claim QBI only for qualifying income.

➡️ Internal link: Requirements for Different Types of Income When Filing U.S. Taxes from Abroad

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📋 6. What to Do Before You File Your 2025 Return

1. Update your records: Collect all foreign income details, housing costs, and allowances.

2. Run a FEIE vs FTC comparison to see which gives the lower tax bill.

3. Check your filing status (MFJ or MFS) in light of new deductions.

4. Download our Individual Tax Prep Checklist to make sure nothing’s missed.

5. Business owner? Grab our Small Business Tax Checklist.

6. Book a 15-minute consultation through our Pricing Page to discuss your specific expat scenario.

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💡 Final Takeaway

The One Big Beautiful Bill Act (OBBBA) reshapes the tax framework for 2025 by locking in TCJA benefits and adding targeted relief like tip and overtime deductions. For U.S. expats and military members, these changes mean new opportunities for optimization — but also the need for careful planning.

Whether you’re deciding between FEIE and FTC, married to a foreign spouse, or earning side income abroad, USA Tax helps you file accurately and maximize every benefit the OBBBA offers.