Some of you may have heard rumblings from the U.S. about a big, “beautiful” (let’s not get carried away) bill this summer – well, it’s here. Signed into law in July 2025, this new tax legislation brings with it some key changes that will come about in 2026.
Still No End to Citizenship-Based Taxation
Let’s start with what didn’t happen:
The bill did not include a repeal of citizenship-based taxation – a disappointment for those who were hoping this could be included. This means the U.S. will continue to tax its citizens on their worldwide income, regardless of residence. While this has long been the norm, advocacy efforts by groups like Democrats Abroad, Tax Fairness for Americans Abroad, ACA (American Citizens Abroad) and SEAT (Stop Extraterritorial American Taxation) will no doubt continue. But for now, nothing has changed here.
GILTI gets a makeover
One of the biggest changes affects Controlled Foreign Corporations (CFCs) – foreign corporations in which U.S. shareholders (owning ≥10%) hold more than 50% of the vote or value. Some of you may have come across the term “GILTI” – it refers to how the U.S. taxes the net income of your CFC, even if that income hasn’t been distributed. Thanks to this legislation, the calculation for taxation has changed, and GILTI is now called “Net CFC Tested Income.” The calculation changes aren’t necessary welcome, but the name change is!
Remittance Tax
The bill includes a new remittance tax that applies to funds sent from the U.S. to foreign recipients. It affects all individuals, including U.S. citizens, but exempts most electronic transfers made via your U.S. bank account or with U.S.-issued debit and credit cards. In practice, this targets cash transfers (including money orders and cashier’s checks) via services like Western Union and MoneyGram. The tax is set at 1% of the transfer amount and is collected directly by the remittance provider.
Other provisions that impact expats filing U.S. taxes
- **An increase in the standard deduction: $15,750 for single and $31,500 for joint filers (indexed to inflation moving forward)
- **An additional deduction for taxpayers 65 years and older. The bonus deduction is $6000 for single filers, $12,000 for joint filers, and phases out at higher incomes. This deduction expires after 2028.
- **An expanded child tax credit (note: children must have U.S. SSNs to qualify!)
IRS moving to digital refunds only
As part of the government’s ongoing modernization efforts, the IRS will begin phasing out paper refund checks. Going forward:
- **Taxpayers will need to provide U.S. bank account details for direct deposit, or
- **Use approved debit card refund systems
This is especially relevant for expats who have previously relied on paper checks mailed to foreign addresses. If you haven’t already, consider setting up a U.S.-based digital bank (e.g., Wise, Revolut, or a U.S. online bank) to avoid refund delays.
If you have questions about any of this, feel free to reach out – we’re always happy to help.
At Nitzel Tax, the goal is to make your U.S. tax filing a little clearer (and a lot less stressful)!
