Introduction: A Canadian Tax Lawyer's Guide to the OBBB
The United States' One Big Beautiful Bill (OBBB), signed into law in 2025, represents a sweeping tax overhaul for individuals and corporations. While the legislation is primarily aimed at U.S. taxpayers, it carries significant consequences for Canadians with U.S. income, property, investments, or cross-border business operations. Consulting with a knowledgeable Canadian tax lawyer is critical to understanding these changes and structuring affairs for compliance and tax efficiency.
U.S. Individual Tax Changes Affecting Canadians
New U.S. Withholding and Reporting
Canadian residents earning U.S.-sourced income—such as dividends, royalties, or consulting fees—should expect revised withholding requirements tied to updated U.S. tax brackets and credits. Proper coordination helps prevent cash-flow surprises and double taxation.
Child Tax Credit Expansion
The OBBB significantly expands the U.S. Child Tax Credit, but most Canadians will not qualify unless they are also U.S. citizens or meet residency-based eligibility rules. Families with dual status should carefully evaluate their situation with the help of a Canadian tax lawyer familiar with U.S. cross-border rules.
Higher U.S. Estate and Gift Exemptions
The legislation increases estate and gift tax exemptions, which may ease exposure for Canadians holding U.S. real estate or U.S. corporate shares. However, without proper planning, double taxation risks remain, making treaty-based strategies and estate planning essential.
Corporate Tax Changes in the U.S. with Canadian Implications
Permanent 21% Corporate Tax Rate
The OBBB makes permanent the 21% flat U.S. corporate tax rate, which directly affects Canadian companies operating U.S. subsidiaries. Careful tax structuring—particularly around profit repatriation and transfer pricing—is crucial to protect after-tax returns.
Expanded U.S. R&D and Depreciation Rules
Canadian-owned U.S. subsidiaries may benefit from enhanced R&D deductions and bonus depreciation rules. Coordinating these with Canada's SR&ED credit system allows businesses to maximize innovation funding while minimizing cross-border tax friction.
Pass-Through Entity Deduction
For Canadians investing in or operating through U.S. partnerships or LLCs, the continuation of the 20% pass-through deduction introduces both opportunities and compliance challenges. A seasoned Canadian tax lawyer can help design structures that reduce U.S. tax exposure without triggering excessive Canadian liability.
Strategic Cross-Border Tax Planning for Canadians
The permanence of several U.S. tax changes under the OBBB creates planning opportunities but also new compliance risks. Canadians should:
- Reassess the timing of distributions, reinvestments, and capital gains in light of U.S. rates.
- Review estate and succession plans for U.S. property to incorporate higher exemptions while minimizing Canadian tax consequences.
- Ensure treaty relief provisions are properly applied to prevent double taxation and penalties.
Cross-border tax planning must remain dynamic, adjusting not only to U.S. reforms but also to parallel Canadian tax developments.
Pro Tax Tips from a Canadian Tax Lawyer
- Coordinate with a Canadian tax lawyer on U.S. and Canadian filings to avoid mismatched reporting.
- Review withholding on dividends, royalties, and consulting fees to prevent excess tax leakage.
- Align R&D expenditures and capital purchases across both jurisdictions for maximum deductions.
- Reassess the structure of U.S. subsidiaries or partnerships in light of permanent rate changes.
- Leverage higher U.S. estate and gift exemptions strategically within Canadian estate planning.
Frequently Asked Questions about OBBB and Canadians
Do Canadians qualify for the new U.S. Child Tax Credit?
Not usually. Only dual-status families—such as Canadian residents who are also U.S. citizens—may qualify.
How does the permanent 21% U.S. corporate tax rate affect Canadian-owned subsidiaries?
It provides predictability and a competitive rate, but requires careful planning to prevent Canadian tax from eroding savings.
Are U.S. pass-through entities complicated for Canadians?
Yes. The 20% deduction offers opportunities but creates cross-border reporting complexity that requires legal planning.
Do U.S. estate tax changes benefit Canadians holding U.S. assets?
Yes, but only partially. Higher exemptions reduce exposure, but Canadians must still account for treaty limits and Canadian estate rules.
Conclusion: Why Canadians Must Reassess U.S. Tax Exposure
Trump's One Big Beautiful Bill reshapes U.S. tax law for the long term. For Canadians with U.S. income, assets, or business interests, these changes demand proactive cross-border planning. Working with a skilled Canadian tax lawyer ensures compliance while uncovering opportunities to reduce your overall tax burden.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
