If you’re an American living abroad, Trump’s new One Big Beautiful Bill Act (OBBBA) is set to change how you plan your taxes in 2025. While much of the debate focuses on headline reforms, the practical impact for expats is worth understanding. Here’s what you need to know:
1. Higher Standard Deductions
Single taxpayers will see their standard deduction rise from $15,000 to $15,750, while married couples filing jointly will go from $30,000 to $31,500. This means more of your income is shielded from federal taxes.
2. Bigger Child Tax Credit
The child tax credit increases from $2,000 to $2,200 per child, providing a small but meaningful boost for families abroad.
3. Tax-Free Federal Accounts for Children
Families earning less than $200,000 annually can now contribute $500 a year to federally managed accounts for children under 12. These accounts, which combine features of Roth IRAs, 529 college plans, and trust funds, come with a $1,000 Treasury seed deposit.
For expats in Israel, eligibility requires:
At least one parent and the child to have a valid Social Security number
The child to be a US citizen at birth
These accounts are tax-deferred in the US but taxed in Israel like any trust, making careful planning essential.
4. Higher Limits for Charitable Donations
If you itemize deductions, you can now deduct charitable contributions up to 75% of your adjusted gross income, up from 60%. This is great news for high-net-worth donors.
Why This Matters for Expats
Understanding these changes is key to maximizing your tax benefits in 2025. From increased deductions to new opportunities for children’s savings, planning ahead ensures you won’t miss out.
