How the Big Beautiful Tax Bill Impacts Australians Living in the US
The newly passed US tax bill brings significant changes, with most policies taking effect in 2025 and 2026. With the new tax code changes, Australians residing in the US should position themselves to take advantage of these new benefits. There are hundreds of pages of new tax code. The below captures most of the relevant changes to Australians living in the US.
The 2017 Tax Cuts Are Now Permanent
This is a positive outcome as it ensures the tax brackets remain the same instead of reverting back to the higher tax brackets prior to the 2017 Tax Cuts which keeps more money in the hands of the taxpayer. For reference the top individual Federal tax rate is 37% and it would have increased to 39.6% had this provision not occurred.
Child Tax Credit Increased
The Child Tax Credit has now been expanded to $2,200 (from $2,000) per child per year.
Charitable Donations for Standard Deduction Filers
Up to $1,000 ($2,000 for joint filers) can now be deducted without itemizing, unlike prior years.
Higher Standard Deduction
Raised to $15,750 (up from $15,000) for individuals and $31,500 (up from $30,000) for couples filing jointly in 2025, with an extra deduction for those over 65.
State & Local Tax Deduction (SALT)
The SALT cap has now been increased from $10,000 to $40,000 which will dramatically benefit taxpayers living in higher taxing states (e.g. NY, California). It can lead to itemizing instead of claiming the standard deduction. This credit starts to phase back to $10,000 when earning above $500,000.
Auto Loan Interest
If you have a new qualifying car loan from 2025, you may be able to deduct up to $10,000 of car loan interest until 2028. The car needs to meet certain criteria and you need to earn below a certain threshold.
Tax-Free Tips and Overtime Pay
Up to $25,000 in tips and $12,500 in overtime may be tax-free, subject to income thresholds.
Estate & Gift Tax Exemptions Doubled:
The 2026 limit on estate and gift tax exemptions has increased to $15M for individuals (was scheduled to be reduced to approximately $7M) and $30M for married filing jointly couples. This is valuable for long-term planning opportunities.
Electric Vehicles (EV) Car Credits are Ending Soon
If you are considering purchasing an EV and are eligible for the Federal tax credit under current rules, you may want to consider purchasing one prior to September 30, 2025. That is the expiration date for eligibility for a one-time credit.
Remittance Tax
Stay tuned for a separate blog post on this coming soon.
Concluding Thoughts
With this new tax bill passing, many Australians living in the US should enjoy further tax breaks. Tax planning continues to be critical as new opportunities come into effect in 2025 and 2026 calendar years. Partnering with Financial Planners and Expat Tax Advisors remains invaluable for optimizing your position and determining what tax changes you may benefit from.
If you’re an existing client, please contact us to schedule a tax planning appointment with us so that we can help you plan accordingly.
If you’re not already a client, now is a great time to align with an expat tax firm. If you are interested in our services, please reach out.
Note: This is general information, not legal or tax advice. Consult a professional for personalized guidance.