Introduction
On July 4, 2025, Congress enacted the One Big Beautiful Bill Act (OBBBA), representing the most comprehensive individual tax overhaul since the 2017 Tax Cuts and Jobs Act. While many headlines focused on corporate and energy incentives, OBBBA also cements key tax rates, preserves popular deductions, and introduces an array of new benefits—both permanent and time‑limited. For non‑resident Indians (NRIs) living in the United States, staying abreast of these changes is essential to minimize U.S. tax liability, optimize cross‑border cash flows, and coordinate U.S. filings with Indian financial planning. The text of the Act can be downloaded here – https://www.congress.gov/bill/119th-congress/house-bill/1/text
Tax rates: Existingtax rates enacted under TJCAare made & adds an additional year of inflation adjustment for determining the dollar amounts at which any rate bracket higher than 12% ends and at which higher than 22% begins.
Standard deduction: TCJA’s increased standard deduction amounts are now permanent. For tax years beginning after 2024, the standard deduction increases to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. The standard deduction will be adjusted for inflation after that. These changes have been made retroactive to include 2025.
Senior deduction: Temporary $6,000 deduction under Sec. 151 for individual taxpayers who are age 65 or older till 2028. This deduction will begin to phase out when a taxpayer’s MAGI exceed $75,000 ($150,000 in the case of a joint return).
SALT cap: Temporary increase in the limit on the federal deduction for state and local taxes (the SALT cap) to $40,000 (from the current $10,000) and adjusts it for inflation. Starting in 2030, it will revert to the current $10,000. Helpful deduction for NRIs in high tax states like California and New York.
Mortgage interest deduction: Permanent extension to TCJA’s provision limiting the Sec. 163 qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt.
Estate and gift tax exemption amounts: Amendment to Sec. 2010 to permanently increase the lifetime estate and gift tax exemption for US Citizens and Residents to $15 million for single filers ($30 million for married filing jointly) effective 2026 and index the exemption amount for inflation after that. Note that there is no change to the lifetime estate & gift tax limit for non-resident aliens which still stands at $60000 & 0 (zero) respectively.
Alternate Minimum Tax: Permanently extends the TCJA’s increased individual alternative minimum tax (AMT) exemption amounts and reverts the exemption phaseout thresholds to their 2018 levels of $500,000 ($1 million in the case of a joint return), indexed for inflation. Phaseout of the exemption amount at 50% of the amount by which the taxpayer’s AMT income exceeds the threshold amount.
Tips & overtime: Temporary deduction of up to $25,000 for qualified tips and $12500 for overtime pay ($25,000 in the case of a joint return). The deduction would be available for taxpayers who claim the standard deduction or itemize deductions. The deduction begins to phase out when the taxpayer’s MAGI exceed $150,000 ($300,000 in the case of a joint return). This deduction will be available for tax years 2025 through 2028.
Child tax credit: Increase in the amount of the nonrefundable child tax credit to $2,200 per child beginning in 2025 and indexes the credit amount for inflation. $1,400 refundable child tax credit, adjusted for inflation is now made permanent. Increased income phaseout threshold amounts of $200,000 ($400,000 in the case of a joint return), as well as the $500 nonrefundable credit for each dependent of the taxpayer other than a qualifying child are also made permanent.
Qualified small business stock: For qualified small business stock acquired after the date of enactment of the Act and held for at least four years, the percentage of gain excluded from gross income will rise from 50% to 75%. If it is held for five years or more, the exclusion percentage will go up to 100%.
Car loan interest: For years 2025 through 2028, qualified passenger vehicle loan interest remains excluded from the definition of personal interest in Sec. 163(h). Exclusion is capped at $10,000 per year and will phase out for taxpayers with MAGI in excess of $100,000 ($200,000 for MFJ).
Adoption credit: A portion (up to $5,000) of the adoption credit is now refundable. That amount will be adjusted for inflation.
Child and dependent care credit: Increases in the amount of the child and dependent care tax credit from 35% to 50% of qualifying expenses. The credit rate phases down for taxpayers with adjusted gross income (AGI) over $15,000. It will be reduced by 1 percentage point (but not below 35%) for each $2,000 that the taxpayer’s AGI exceeds $15,000. It will then be further reduced by (but not below 20%) 1 percentage point for each $2,000 ($4,000 for joint returns) that their AGI exceeds $75,000 ($150,000 for joint returns).
Trump accounts: A new form of Individual Retirement Account (IRA) introduced for exclusive benefit to persons under the age of 18 under Sec. 408(a). Contributions can only be made in calendar years before the beneficiary turns 18 and distributions can only be made starting in the calendar year the beneficiary turns 18. More details awaited.
Sec. 529 plans: Tax-exempt distributions from Sec. 529 savings plans can now be used for additional educational expenses in connection with enrolment or attendance at an elementary or secondary school and additional qualified higher education expenses, including “qualified postsecondary credentialing expenses.”
SSN requirements: A new SSN requirement for claiming an American opportunity or lifetime learning credit under Sec. 25A.
Charitable contributions: Taxpayers who do not elect to itemize can get a charitable contribution deduction of up to $1,000 for single filers or $2,000 for married taxpayers filing jointly for certain charitable contributions. For itemizers, a 0.5% floor on the charitable contribution deduction will apply.
Form 1099 reporting threshold: Information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
Remittance transfer tax: 1% tax on “remittance transfers,” imposed on the sender who is not a US citizen. A remittance transfer means a transfer of cash, a money order, a cashier’s check, or similar physical instrument. It does not include funds withdrawn from an account held with a financial institution or charged to a credit or debit card.
Checklist basis the OBBBA provisions
- Check eligibility for the higher AMT exemption to avoid unnecessary alternative minimum tax especially while exercising ISOs etc.
- Maximize standard deduction if not itemizing U.S. deductions (common for expats with India income).
- Consider using the increased SALT cap fully especially if you live in high tax states.
- Review U.S. mortgage interest benefits if holding U.S. property or considering purchase.
- Evaluate setting up Trump Tax-Free Accounts (TTFA) to build tax-free savings for kids
- Use expanded 529 plans for U.S.-based children’s education, especially if considering U.S. college options.
- Claim refundable adoption credit if adopting domestically or through inter-country processes.
- Explore ABLE account options for family members with disabilities, especially if U.S. residents.
- Plan charitable donations to ensure U.S. deductions under the new universal charitable credit.
- Review eligibility for Section 1202 QSBS exemption if investing in early-stage U.S. startups with future exit in mind.
- Track and report India income correctly under global income rules while using foreign tax credits.
- Be vigilant on 1099-Ks for U.S. freelancing or side gigs due to changes in reporting thresholds.
- Report tip income or cash-based receipts from personal services under IRS compliance tightening.
- Ensure U.S. SSNs or ITINs for spouse/dependents are available to claim full tax credits.
- Utilize electric vehicle or charger credits soon before phaseouts apply in 2025. Consider new auto loan interest provisions if planning to buy a new car on loan.
- Consider Roth IRA conversions in low-income years to lock in tax-free growth. This strategy is not advisable if planning to return to India in view of India tax on Roth.
- Coordinate U.S.-India tax filing deadlines to maximize FTCs and avoid double taxation in light of new credit rules.
- Discuss with a tax professional on potential estate/gift tax planning especially if planning to return to India in a few years.
Conclusion & Action Steps
OBBA represents a blend of permanence and innovation in individual taxation. By locking in lower rates, preserving the standard deduction, and extending popular TCJA measures, it provides a stable foundation for long‑term cross‑border planning. Simultaneously, the Act’s new above‑the‑line deductions, expanded credits, and enhanced reporting thresholds offer fresh opportunities to lower taxable income and secure refunds.
Image credit – https://americansoverseas.org/
Copyright © CA Abhinav Gulechha. All Rights Reserved. No part of this post can be reproduced without prior written permission of CA Abhinav Gulechha. The content of the post is for general information purposes only & does not constitute professional advice. For any feedback on this article, please write to contact@abhinavgulechha.com. For any India-US Crossborder Tax questions, please feel free to post on https://www.reddit.com/r/IndiaUSTax/