Summary:
In countries where – as per the tax treaty – the U.S. does not have taxing rights to U.S. Social Security and “Social Security Like” equivalents, the standard deduction coupled with the new $6000 bonus $12000 if married and filing jointly) may exclude large numbers of Americans abroad from actually having to pay U.S. tax. My initial reaction is that it will NOT have any impact on the requirement to file a U.S. tax return.
Of particular relevance to Americans abroad (who if married are more likely to use the “married filing separately” category) is that:
If one is married, one MUST file jointly in order to be eligible for this benefit. 71013 of the “Big Beautiful Bill” includes:
v) Married individuals.–If the taxpayer is a married individual (within the meaning of section 7703), this subparagraph shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.
Although it is obvious why this provision is included, it is a negative for Americans abroad who are more likely to use the “married filing separately” category. To put it simply:
If you are an American abroad who is married you benefit from this provision ONLY if you file jointly with your spouse.
Part I – Possible payment of U.s. tax
1. The $6000 is per person ($12000 for a married couple filing jointly) and is an additional deduction from income. (Not available for those who file “married filing separately”!)
2. In Canada: U.S. Social Security, Canada Pension Plan, OAS and certain other pensions are taxed ONLY by Canada. See the U.S./Canada tax treaty – Article XVIII
3. This means that a U.S. citizen living in Canada who is a “Senior” effectively has (explained by the AARP as follows):
Does it replace the existing extra standard deduction for people 65 and older?
No. The new deduction is in addition to the existing extra standard deduction for people age 65-plus. For the 2025 tax year, that’s $2,000 for single taxpayers and $1,600 per qualifying spouse for married couples filing jointly.
As a result, the new $6,000 deduction is stacked on top of both the regular standard deduction — $15,750 for single filers or $31,500 for married couples filing jointly in 2025 — and the 65-plus addition.For instance, a 65-year-old single taxpayer who qualifies for the full $6,000 deduction would be able to deduct a total of $23,750 from these three tax breaks on their 2025 tax return. A qualifying 65-year-old couple could deduct up to $46,700.
What if I’m itemizing?
You can claim the new deduction regardless of whether you itemize your taxes or claim the standard deduction.
If you itemize, you stack the new deduction on top of your itemized deductions. Let’s say you’re single, 65 years old, eligible for the full $6,000 deduction and have $40,000 of itemized deductions. If you have no other deductions, you can lower your taxable income by a total of $46,000.
Bottom line: For $23,750 USD is the deduction from income. This is approximately $32,585.13 CDN (as of today’s exchange rate). Again, this means that a U.S. citizen living in Canada would have to have $32,585.12 (at today’s exchange rates) to have taxable income in the United States.
Benefit: This could really simplify the tax filing because:
– Neither form 2555 nor the FTC 1116 forms might not need to be filed
– meaning the return could conceivably be as simple as: 1040, Schedule B, Form 8333 (possibly) Form 8938, and FBAR. (Depending on your activities other forms might be still be required: Form 8621, Form 5471, etc.
You might be able to file yourself!!
Part II – Who is required to file a U.S. tax return?
According to HR Block (July of 2025):
Do I have to file taxes? Minimum income to file taxes
When it comes to filing, the following taxable income thresholds determine whether you should file a federal return depending on your filing status.
Single filing status:
$14,600 if under age 65
$16,550 if age 65 or older
Married Filing Jointly:
$29,200 if both spouses are under age 65
$30,750 if one spouse is under age 65 and one is age 65 or older
$32,300 if both spouses are age 65 or older
Married Filing Separately — $5 regardless of age
Head of Household:
$21,900 if under age 65
$23,850 if age 65 or older
Qualifying Surviving Spouse:
$29,200 if under age 65
$30,750 if age 65 or older
Some odds and ends:
1. if you are “self-employed” and have more than $400 of income then you are required to file.
2. Note that if your are “married filing separately” you are required to file if your income hits the $5 threshold.
https://www.hrblock.com/tax-center/income/other-income/how-much-do-you-have-to-make-to-file-taxes/
John Richardson – Follow me on X.com/expatriationlaw
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Appendices Generally show that the $6000 is a deduction that is:
1. Separate from the standard deduction; and
2. Is applied in addition to either the standard deduction or itemized deduction
Appendix A – Internal Revenue Code 63 – The Role Of The Standard Deduction
26 U.S. Code § 63 – Taxable income defined
(a) In general
Except as provided in subsection (b), for purposes of this subtitle, the term “taxable income” means gross income minus the deductions allowed by this chapter (other than the standard deduction).
(b) Individuals who do not itemize their deductions In the case of an individual who does not elect to itemize his deductions for the taxable year, for purposes of this subtitle, the term “taxable income” means adjusted gross income, minus—
(1) the standard deduction,
(2) the deduction for personal exemptions provided in section 151,
(3) any deduction provided in section 199A, and
(4) the deduction provided in section 170(p).
(c) Standard deduction For purposes of this subtitle—
(1) In general Except as otherwise provided in this subsection, the term “standard deduction” means the sum of—
(A) the basic standard deduction, and
(B) the additional standard deduction.
(2) Basic standard deduction For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2(a)),
(B) $4,400 in the case of a head of household (as defined in section 2(b)), or
(C) $3,000 in any other case.
https://www.law.cornell.edu/uscode/text/26/63
JR Commentary: The “standard deduction” is different from this new deduction for Seniors
Appendix B – Internal Revenue Code 151 – Additional Personal Deductions
26 U.S. Code § 151 – Allowance of deductions for personal exemptions
(a) Allowance of deductions
In the case of an individual, the exemptions provided by this section shall be allowed as deductions in computing taxable income.
(b) Taxpayer and spouse
An exemption of the exemption amount for the taxpayer; and an additional exemption of the exemption amount for the spouse of the taxpayer if a joint return is not made by the taxpayer and his spouse, and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, has no gross income and is not the dependent of another taxpayer.
(c) Additional exemption for dependents
An exemption of the exemption amount for each individual who is a dependent (as defined in section 152) of the taxpayer for the taxable year.
(d) Exemption amount For purposes of this section—
(1) In general
Except as otherwise provided in this subsection, the term “exemption amount” means $2,000.
(2) Exemption amount disallowed in case of certain dependents
In the case of an individual with respect to whom a deduction under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the exemption amount applicable to such individual for such individual’s taxable year shall be zero.
(3) Phaseout
(A) In general
In the case of any taxpayer whose adjusted gross income for the taxable year exceeds the applicable amount in effect under section 68(b), the exemption amount shall be reduced by the applicable percentage.
(B) Applicable percentage
For purposes of subparagraph (A), the term “applicable percentage” means 2 percentage points for each $2,500 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds the applicable amount in effect under section 68(b). In the case of a married individual filing a separate return, the preceding sentence shall be applied by substituting “$1,250” for “$2,500”. In no event shall the applicable percentage exceed 100 percent.
(C) Coordination with other provisions
The provisions of this paragraph shall not apply for purposes of determining whether a deduction under this section with respect to any individual is allowable to another taxpayer for any taxable year.
(4) Inflation adjustment Except as provided in paragraph (5), in the case of any taxable year beginning in a calendar year after 1989, the dollar amount contained in paragraph (1) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 1988” for “calendar year 2016” in subparagraph (A)(ii) thereof.
(5) Special rules for taxable years 2018 through 2025In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—
(A) Exemption amount
The term “exemption amount” means zero.
(B) References
For purposes of any other provision of this title, the reduction of the exemption amount to zero under subparagraph (A) shall not be taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction, under this section.
(e) Identifying information required
No exemption shall be allowed under this section with respect to any individual unless the TIN of such individual is included on the return claiming the exemption.
https://www.law.cornell.edu/uscode/text/26/151
Appendix C – Relevant Text Of The OBBB
SEC. 70103. TERMINATION OF DEDUCTION FOR PERSONAL EXEMPTIONS OTHER THAN
TEMPORARY SENIOR DEDUCTION.
(a) In General.–Section 151(d)(5) is amended–
(1) by striking “2018 through 2025” in the heading and
inserting “beginning after 2017”,
(2) by striking “, and before January 1, 2026”, and
(3) by adding at the end the following new subparagraph:
(C) Deduction for seniors.–
“(i) In general.–In the case of a taxable year
beginning before January 1, 2029, there shall be allowed a
deduction in an amount equal to $6,000 for each qualified
individual with respect to the taxpayer.
“(ii) Qualified individual.–For purposes of clause
(i), the term `qualified individual’ means–
“(I) the taxpayer, if the taxpayer has attained
age 65 before the close of the taxable year, and
“(II) in the case of a joint return, the
taxpayer’s spouse, if such spouse has attained age 65
before the close of the taxable year.
“(iii) Limitation based on modified adjusted gross
income.–
“(I) In general.–In the case of any taxpayer for
any taxable year, the $6,000 amount in clause (i) shall
be reduced (but not below zero) by 6 percent of so much
of the taxpayer’s modified adjusted gross income as
exceeds $75,000 ($150,000 in the case of a joint
return).
“(II) Modified adjusted gross income.–For
purposes of this clause, the term `modified adjusted
gross income’ means the adjusted gross income of the
taxpayer for the taxable year increased by any amount
excluded from gross income under section 911, 931, or
933.
“(iv) Social security number required.–
“(I) In general.–Clause (i) shall not apply with
respect to a qualified individual unless the taxpayer
includes such qualified individual’s social security
number on the return of tax for the taxable year.
“(II) Social security number.–For purposes of
subclause (I), the term `social security number’ has
the meaning given such term in section 24(h)(7).
“(v) Married individuals.–If the taxpayer is a
married individual (within the meaning of section 7703),
this subparagraph shall apply only if the taxpayer and the
taxpayer’s spouse file a joint return for the taxable
year.”.
https://www.congress.gov/bill/119th-congress/house-bill/1/text
