On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act, which is by far the most significant US tax legislation since the 2017 Tax Cuts and Jobs Act. This new legislation introduced numerous major changes, including the extension of 2017 tax cuts, implementation of new tax deductions for certain overtime and tips, and sweeping cuts to Medicaid eligibility. However, the Big Beautiful Bill, like every previous effort at major tax reform, notably fails to deliver for US expats in any way. In fact, the bill arguably just made matters worse for Americans living abroad.
A Disappointing History of Tax Reform
Since the Tax Reform Act of 1986, there have been only three major changes to US tax policy, two of which were passed by President Donald Trump: the 2017 Tax Cuts and Jobs Act (TCJA) and the 2025 One Big Beautiful Bill Act (BBB). Despite limited (and perhaps foolish) optimism, the BBB did nothing to help US expats obligated to report all worldwide income, comply with a byzantine maze of reporting requirements, and file complex returns every year (while incurring US tax owing in some cases). Given the difficulty and infrequency of passing major tax reform (three times in the last 37 years), the BBB was almost certainly the last glimmer of hope for meaningful change to the difficult tax regime Americans living abroad face, under the current administration or any others to come.
The Problem of Citizenship-Based Taxation
Citizenship-based taxation creates a multitude of issues for Americans living abroad. Most fundamentally, all US citizens are required to file tax returns reporting their entire worldwide income, even if that income has nothing to do with the United States. In addition to this basic filing requirement, US citizens must also complete extensive informational returns to disclose bank accounts, trusts, and interests in certain corporate entities located overseas. For many expats, compliance costs alone can reach thousands of dollars annually, even before any tax is paid to the United States.
Additionally, the current system of citizenship-based taxation often results in harsh tax consequences for expats. For instance, selling a principal residence located in a country that exempts such sales from capital gains tax can trigger hundreds of thousands in US liability with no foreign tax credits to ease the burden. Americans living abroad can also find it very difficult to invest in certain asset classes, including mutual funds and ETFs, given the punitive taxes imposed by the United States on controlled foreign corporations (CFCs), passive foreign investment companies (PFICs), and global intangible low-taxed income (GILTI). The BBB has worsened some of these issues by tightening the rules for claiming foreign tax credits on certain non-US income. That's just more salt in the wound (no pun intended with the SALT [state and local tax] exemptions in the BBB) for US citizens living outside the US.
In addition to tax problems during life, many high-net-worth expats are also concerned about the US estate tax. Although the BBB did increase the unified gift and estate tax credit to $15M USD, there is no guarantee that this favourable policy will endure in the current turbulent political landscape, or be that high in the year you die (if you die a US citizen). In fact, many expats may benefit from using the credit now to implement tax planning strategies rather than waiting and risking unfavourable changes in the future.
In short, citizenship-based taxation subjects US expats to an array of onerous filing and reporting obligations whose annual cost can quickly escalate into the thousands even for those who can avoid double taxation. The BBB does nothing to change this fundamental calculus, and it is unlikely that any other major tax reform will alleviate US expats' predicament in the foreseeable future. Indeed, the overall trend has been in the opposite direction. Recent changes to US tax law that have specifically addressed expats, such as FATCA, Transition Tax, and the Section 250 tax on so-called GILTI income, have all been aimed at tightening the regulation of US citizens holding foreign assets.
At some point, Charlie Brown needs to realize that every time Lucy invites him to kick the football, she will simply move the ball at the last minute. The BBB was that "Charlie Brown" realization moment for millions of Americans living abroad.
Renunciation: An Effective Solution
Fortunately, there is a solution to the tax burdens of US citizenship. Proper renunciation of US citizenship can eliminate burdensome citizenship-based filing requirements while still allowing expats to travel to the United States without harassment at the border, retain their hard-earned Social Security benefits, and invest in US assets. With proper planning, it is also almost always possible to renounce without any adverse US tax consequences. The best rules in history to renounce and avoid the US exit tax altogether.
Renunciation can be a complex and intimidating process, but the vast majority of potential negative consequences, including difficulties in travelling to the United States, can be avoided if it is done the right way. Our team of experienced US tax attorneys and accountants helps between 900 and 1,200 people terminate their US status correctly every year across six continents. Hundreds more than any firm in the world annually.
If you or a family member is a US citizen or Green Card holder considering renunciation, we invite you to visit our dedicated webpage for more information. This page contains links to register for our upcoming renunciation webinars (a highly recommended session to learn the ins and outs). You can find the right webinar on renouncing US citizenship tailored to your geographic location in our events listings: Register HERE.
These webinars thoroughly review everything you need to know about the US citizenship renunciation process and available options to allow you to decide on what is best for you and your family. If you cannot make a live renunciation session, email Alex Marino at amarino@moodystax.com for a recording of such to watch at your leisure.
Moodys Tax Law is only about tax. It is not an add-on service, it is our singular focus. Our Canadian and US lawyers and Chartered Accountants work together to develop effective tax strategies that get results, for individuals and corporate clients with interests in Canada, the US or both. Our strengths lie in Canadian and US cross-border tax advisory services, estateplanning, and tax litigation/dispute resolution. We identify areas of risk and opportunity, and create plans that yield the right balance of protection, optimization and compliance for each of our clients' special circumstances.
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.
