Tax Planning

Tax Planning Strategies in Light of the U.S. “One, Big, Beautiful Bill”

Key provisions of the U.S. OBBBA legislation affect global taxpayers—learn how changes to income rates, deductions, and credits alter international tax planning opportunities.

By NomadicTax Research Team • 6 min read • September 12, 2026

## Understanding the One, Big, Beautiful Bill (OBBBA) for Global Taxpayers The OBBBA (Public Law 119-21), enacted 4 July 2025, introduced sweeping changes to U.S. tax law with major international implications. It made permanent the individual income tax rates and standard deduction increases, restructured credits and deductions relating to foreign income, and made changes to corporate provisions that impact multinationals. ([oecd.org](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai)) Global taxpayers—expatriates, foreign corporations with U.S. exposure, and U.S. multinationals—must reassess tax structuring in response. --- ## Key Tax Planning Adjustments for Individuals Abroad - **Foreign Earned Income Exclusion (FEIE):** Raises from approximately USD 130,000 to *USD 132,900* for tax year 2026. This alters the breakeven where remaining in domestic status with foreign residences is advantageous. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) - **Standard Deduction and Rates Fixed:** With standard deduction fixed at USD 16,100 (single), USD 32,200 (married filing jointly), planning around itemized deductions becomes critical, especially for foreign taxes paid. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) - **Foreign Tax Credits and Section 898/960 Transition Rules:** OBBBA removes the one-month deferral election under section 898(c)(2) for specified foreign corporations, affecting how foreign net income tax is allocated between the first required year and succeeding years. Also proposed regulations under section 960(d)(4) address disallowance of foreign tax credits on certain distributions of previously taxed earnings and profits. Global taxpayers relying on foreign tax credits must evaluate exposure under these proposed rules. ([irs.gov](https://www.irs.gov/irb/2026-37_irb?utm_source=openai)) --- ## Corporate and Entity Setup Implications - **Permanent Corporate Rates and Base Changes:** Certain corporate incentives are reworked. There are changes to business interest limitations, elimination of the deemed intangible income return in certain tests, and permanent enactment of BEAT at 10.5% starting 2026. Any multinational presence or cross-border setup must check exposure under BEPS-style rules and adjusted base erosion rules. ([oecd.org](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai)) - **Investment Incentives and Sector Targeting:** Entities operating in advanced manufacturing or developing technologies—semiconductors, clean energy—may still benefit from targeted credits, but note deadlines or modifications. For example, certain clean energy incentives are being phased out or modified; some are permanently ended after specific dates. ([oecd.org](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai)) --- ## Practical Steps for Global Taxpayers 1. **Run jurisdiction comparisons** — when U.S. exposure exists, simulate alternative scenarios: paying foreign taxes vs U.S. credit vs using treaty relief. 2. **Monitor proposed rule-makings** — sections 898(c) and 960(d)(4) proposed regulations may reshape foreign tax credit relief. Engage with comment periods if affected. ([irs.gov](https://www.irs.gov/irb/2026-37_irb?utm_source=openai)) 3. **Evaluate entity choice** — for businesses with cross-border operations, reconsider entity form, branch vs subsidiary, in light of U.S. base erosion rules and global minimum tax under BEPS. 4. **Timing of income recognition** — where possible, consider shifting income or expenses across tax years to minimize foreign tax credit mismatches, particularly when taxable year changes occur due to the repeal of deferral arrangements. --- ## Example Scenario *An Australian resident taxpayer owns a U.S.‐based entity earning passive income with foreign tax withheld. Under previous rules, foreign taxes paid might align neatly with U.S. tax periods. With repeal of the deferral election under section 898(c)(2), the taxable year and foreign accrual calendar may no longer match. The taxpayer must now plan how to allocate foreign tax credits across mismatched periods and watch new proposed regulations to avoid disallowance.* --- ## Takeaway For anyone with cross-border income or operations touching the U.S., the OBBBA reshapes the tax landscape. To optimize tax liability, align income recognition, entity structure, and deductions to the new permanent rules; and keep abreast of forthcoming regulatory implementation, especially for foreign tax credit and international entity taxation.