The One Big Beautiful Bill: what changed for Canadians with US income?

The One Big Beautiful Bill Act (Pub. L. 119-21), signed July 4, 2025, is the largest US tax bill since the Tax Cuts and Jobs Act of 2017. Most of its individual provisions make permanent what the TCJA had set to expire after 2025: the 37% top rate, the higher standard deduction, the child tax credit at its current level, and the estate tax exemption at its doubled level. A few provisions are new: deductions for tips and overtime, a senior deduction that replaces the promised “no tax on Social Security,” and on the business side, the renaming of GILTI, the restoration of full expensing, and a permanent Section 199A deduction.

Not all of this matters equally for a Canadian with US income or a US citizen in Canada. This page walks through the provisions that actually change the cross-border math.

The estate tax exemption is now $15 million, permanently

This is the provision with the largest impact for Canadians with US property. The basic exclusion amount under IRC 2010(c)(3) is now $15,000,000 per individual ($30,000,000 per married couple with portability), effective for deaths and gifts after December 31, 2025, indexed for inflation starting in 2027. The TCJA’s doubling was set to sunset after 2025, which would have dropped the exemption to roughly $7 million. That sunset is gone.

For Canadian snowbirds, this changes the arithmetic on the treaty credit. Article XXIX B(2) of the US-Canada tax treaty gives a Canadian resident’s estate a pro-rata share of the US citizen’s exemption: (US-situs assets / worldwide estate) x $15,000,000. A Canadian with a $500,000 Florida condo and a $5 million worldwide estate gets a prorated exemption of $1.5 million, well above the condo’s value. Under the now-cancelled sunset, that figure would have dropped to $700,000. The safety margin is now wide enough that most Canadian property owners will never face a US estate tax bill.

The $60,000 statutory exemption for non-resident aliens (IRC 2102(b)(1)) is unchanged, so the treaty claim on Form 706-NA still matters. The full analysis is in the estate tax guide.

The individual tax rates are permanent

The seven TCJA bracket rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent law. Without this Act, they would have reverted to the pre-TCJA rates after 2025, topping out at 39.6%.

For cross-border filers, the rate permanence matters for two reasons. First, it stabilizes the foreign tax credit limitation under IRC 904: the US tax rate in the denominator of the FTC fraction is now predictable. Second, it means the gap between US and Canadian marginal rates (Canadian combined federal/provincial rates often exceed 50%) is now permanent, and the FTC mechanics that prevent double tax continue to depend on the same rate spread.

The SALT cap is $40,000, temporarily

The state and local tax deduction cap rose from $10,000 to $40,000 for tax years 2025 through 2029 ($20,000 married filing separately). It phases down by 30% of modified AGI exceeding $500,000, hitting a floor of $10,000 at roughly $600,000. Both the cap and the threshold increase 1% per year through 2029. In 2030 it reverts to $10,000 permanently.

For most cross-border Canadians, this provision does very little. Canadian federal and provincial income taxes are not SALT; they are creditable under IRC 901 or deductible as foreign taxes, but either way the SALT cap doesn’t touch them. The cap matters only for US state and local property taxes on US real estate and US state income taxes, which is relevant for US citizens living in states with income taxes, or Canadians who itemize on a US return for their rental property.

One interaction to watch: the phase-down calculation adds back Section 911 excluded income to MAGI. A US citizen abroad who claims the foreign earned income exclusion and also has US property tax to deduct may find their SALT cap reduced by the add-back.

The “no tax on Social Security” is a $6,000 deduction

The headline is misleading. IRC Section 86, which determines how much of a Social Security benefit is includible in gross income (up to 85%), is completely unchanged. The provisional income thresholds ($25,000 single / $32,000 joint for the 50% tier, $34,000 / $44,000 for the 85% tier) are the same as they have been since 1993.

What the Act created is a new “senior deduction” of $6,000 per qualifying individual age 65 or older ($12,000 if both spouses qualify on a joint return), for tax years 2025 through 2028. It phases out at 6% of MAGI above $75,000 single / $150,000 joint, reaching zero at $175,000 / $250,000.

The deduction does not reduce AGI. It reduces taxable income only. That means it does not change the IRC 86 calculation. A retiree’s Social Security benefit is still up to 85% includible in gross income, and the deduction offsets some of the resulting tax but does not change the inclusion.

For cross-border retirees receiving both CPP and US Social Security: the senior deduction is a US-side provision that reduces US taxable income. The Canadian treatment of US Social Security under Article XVIII(5) of the tax treaty is unaffected. Canadian residents receiving US Social Security still include 85% in Canadian income and claim a 15% deduction on line 25600. The deduction is available to US citizens filing a 1040 from Canada, provided they meet the age, SSN, and income requirements.

Tips and overtime deductions for TN visa workers

Two new above-the-line deductions, both temporary (2025 through 2028):

Tips (new IRC 224): up to $25,000 of qualified tips per year. Only cash or charged tips in occupations that “customarily and regularly” received tips as of December 31, 2024. Tips in a specified service trade or business (the IRC 199A(d)(2) list, which includes accounting, law, consulting, and financial services) do not qualify. The deduction phases out above $150,000 single / $300,000 joint. Tips remain fully subject to FICA; this is an income tax deduction only.

Overtime (new IRC 225): up to $12,500 per year ($25,000 joint). Only the overtime premium (the “half” portion of time-and-a-half under FLSA Section 7), not the base pay worked during overtime hours. Employees exempt from the FLSA (executives, professionals, outside sales) do not qualify. Same income phase-out as tips.

For Canadians on TN visas in tipped occupations (food service, hospitality), the tip deduction reduces US federal income tax on up to $25,000 of tip income. The Canadian side is unaffected because these workers are US residents filing only a US return. For TN workers who are still filing both US and Canadian returns (dual residents, or departure-year filers), the deduction reduces US taxable income, which can shift the FTC balance.

GILTI is now “net CFC tested income”

The existing guide covers this in full: what changed with GILTI under the 2025 Act. The summary for this page:

The qualified business asset investment (QBAI) routine return is eliminated, so the full tested income of a controlled foreign corporation flows into the US shareholder’s inclusion for tax years beginning after December 31, 2025. The Section 250 deduction drops from 50% to 40%, producing an effective rate of 12.6% on net CFC tested income before credits. The deemed-paid foreign tax credit rises from 80% to 90% of tested foreign income taxes. The prior-law scheduled cut to 37.5% was repealed, so measured against where the deduction was headed, the 40% figure is an improvement.

For a US citizen who owns a Canadian-controlled private corporation, the QBAI repeal broadens the inclusion base. But if the CCPC pays Canadian corporate tax at an effective rate above roughly 14%, the improved FTC should substantially or fully offset the US liability. The net effect is fact-specific and worth running.

Full expensing is back, permanently

The 100% first-year bonus depreciation under IRC 168(k) is restored for qualified property acquired and placed in service after January 19, 2025. The TCJA phase-down (which had dropped to 40% in 2025 and was headed to 0% in 2027) is gone. This is permanent, not temporary.

For cross-border filers who own US rental property, equipment, or leasehold improvements, the immediate write-off of the full cost in the year of acquisition reduces US taxable income dollar for dollar. Canada’s capital cost allowance system does not provide the same first-year treatment for most asset classes, so the timing difference between US and Canadian depreciation creates a temporary FTC mismatch that resolves over the asset’s life.

The Section 179 expensing limit also increased to $2,500,000 (from roughly $1,160,000 indexed), with a phase-out threshold of $4,000,000.

The QBI deduction is permanent at 20%

Section 199A’s 20% deduction on qualified business income from pass-through entities was set to expire after 2025. It is now permanent. The SSTB phase-in range widened ($75,000 single / $150,000 joint, up from $50,000 / $100,000), and a $400 minimum deduction applies for taxpayers who materially participate in a business with at least $1,000 of QBI.

For US citizens in Canada with pass-through income from a US trade or business (a US partnership, LLC, or sole proprietorship), the permanence means the 20% deduction is now a reliable planning input. Income from a Canadian corporation that comes through as net CFC tested income or Subpart F does not qualify for Section 199A.

Energy credits are dead or dying

The Act accelerated the sunset on most Inflation Reduction Act clean energy credits. Three deadlines matter for cross-border filers:

Electric vehicles (IRC 30D, 25E, 45W): credit terminated for vehicles acquired after September 30, 2025. “Acquired” means a binding written contract plus a payment, even a nominal one. If you acquired by September 30 you can still claim the credit when the vehicle is placed in service.

Residential solar and energy improvements (IRC 25D, 25C): credit terminated for expenditures after December 31, 2025. For 25D (solar), the IRS has clarified that payments made before the deadline may qualify even if installation is not yet complete (IRS FAQ, Fact Sheet 2025-05).

Alternative fuel vehicle refueling property (IRC 30C): terminated for property placed in service after June 30, 2026.

For Canadians who own US property and installed or were planning to install solar, the window has effectively closed: expenditures must have been made by December 31, 2025. For anyone who bought or leased an EV in the US, the credit was available only through September 30, 2025.

The 1% remittance excise tax

A new excise tax under IRC 4475 imposes 1% on “applicable remittance transfers” (cash, money orders, cashier’s checks sent internationally through a remittance transfer provider), effective January 1, 2026. The sender is liable and the provider collects it.

The exclusion that matters for most cross-border clients: transfers funded from a US financial institution account (bank wire, ACH) or by a US-issued debit or credit card are exempt. So a standard bank wire from a US bank account to a Canadian bank account is not hit. The tax targets cash and money order services (Western Union, MoneyGram, and similar providers). If you use a fintech remittance service, check whether it qualifies for the exemption based on how it funds the transfer.

Section 899 (retaliatory withholding) was removed

The House-passed version of the bill included Section 899, which would have authorized Treasury to impose escalating withholding rates (up to 50%) on payments to residents of countries with “unfair foreign taxes,” targeting Pillar Two and digital services taxes. This would have overridden treaty-reduced withholding rates on US dividends, interest, and royalties paid to Canadians.

Section 899 was removed during Senate negotiations after a G7 agreement in late June 2025. The Canada-US treaty’s reduced withholding rates (15% on dividends, 0/10% on interest, 0/10% on royalties) remain intact. Canadian registered plans (RRSPs, RRIFs) remain protected by the treaty. This is the provision that didn’t happen, and for Canadian investors in US securities it’s the most important line in the bill.

The standard deduction increased

The permanent amounts are $15,750 single / $31,500 joint / $23,625 head of household for 2025, indexed going forward. These are above the TCJA levels that were scheduled to revert to roughly half after 2025.

For nonresident aliens filing Form 1040-NR, this changes nothing: IRC 63(c)(6) still prohibits NRAs from claiming the standard deduction. A Canadian who is not a US resident and files a US return for rental income or a treaty-reduced refund must still itemize.

What the Act did not change

A few things that were discussed or expected and are not in the final law:

• IRC Section 86 is unchanged. Social Security benefits are still up to 85% taxable.
• FBAR, FATCA, Form 5471, Form 3520 reporting obligations are unchanged. No simplification.
• The foreign earned income exclusion (IRC 911) is unchanged structurally. The exclusion amount continues to adjust for inflation ($130,000 for 2025, $132,900 for 2026).
• Treaty override provisions were removed (Section 899). Treaty rates are intact.
• The corporate tax rate is unchanged at 21%.
• Capital gains rates are unchanged at 0%/15%/20%.
• The exit tax under IRC 877A is unchanged. Covered expatriates still face mark-to-market on worldwide assets above the exclusion amount.

Summary table

Provision	What it does	Permanent or temporary	Cross-border angle
Estate exemption $15M	Treaty pro-rata credit now based on $15M	Permanent	Most Canadian property owners are now fully sheltered
37% top rate	Prevents reversion to 39.6%	Permanent	Stabilizes the FTC limitation fraction
SALT cap $40K	Raises the cap, with income phase-down	2025-2029	Relevant only for US property taxes or US state income taxes
Senior deduction $6K	New deduction for ages 65+	2025-2028	Reduces US tax but does not change Social Security inclusion
Tips deduction $25K	Above-the-line deduction on qualified tips	2025-2028	TN visa workers in tipped occupations
Overtime deduction $12.5K	Above-the-line deduction on FLSA overtime premium	2025-2028	TN visa workers in non-exempt positions
Net CFC tested income	Replaces GILTI, repeals QBAI, lowers section 250 deduction to 40%	Permanent	US citizens with a CCPC; run the FTC math fresh
100% bonus depreciation	Restored, permanent	Permanent	US rental property and equipment
199A QBI 20%	Made permanent	Permanent	US pass-through businesses owned by cross-border filers
Child tax credit $2,200	Up from $2,000, now indexed	Permanent	SSN requirement now applies to the claiming parent, not just the child
EV credit (30D)	Terminated for vehicles acquired after Sept 30, 2025	Permanent repeal	Canadians who bought a US EV after the deadline get no credit
Solar credit (25D)	Terminated for expenditures after Dec 31, 2025	Permanent repeal	US property owners who missed the deadline are out
Remittance excise tax	1% on cash/money order transfers abroad	Permanent	Bank wires and card-funded transfers are exempt
Wash sale rules	Extended to crypto and digital assets	Permanent	Loss harvesting within 30 days now disallowed for crypto
QSBS (Section 1202)	Graduated exclusion: 50%/75%/100% at 3/4/5 years	Permanent	Cross-border founders with US C-corps; Canadian treatment is separate
Section 899 removed	Retaliatory withholding struck from the final law	N/A	Treaty withholding rates on Canadian investments are safe

What should I do next?

If you filed a 2025 return before July 4 and didn’t claim the new deductions (tips, overtime, senior), you may want to amend. If you own US property and were planning around a looming estate tax sunset, that planning pressure is removed. If you own a Canadian corporation as a US citizen, the GILTI changes hit tax years beginning in 2026, so the first return affected is the one you file in 2027.

For the GILTI changes specifically: the full analysis of net CFC tested income. For the estate tax treaty credit: the $60,000 exemption guide. For the Social Security side: how CPP and OAS are taxed if you live in the US.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.