The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, made most of the 2017 Tax Cuts and Jobs Act permanent and layered on a long list of new provisions: tax-free tips and overtime, a much larger SALT cap, Trump Accounts for children, and more. Many changes took effect for 2025 returns, and several more begin with the 2026 tax year. This article summarizes the provisions that matter most to Japanese expatriate employees, entrepreneurs, and investors living in the U.S., and to people in Japan with U.S. ties, organized by individuals, families, businesses, and investors, using 2026 figures. Detailed articles on individual topics are linked at the end.
Core Individual Items: Rates, Standard Deduction, SALT
| Item | What changed | Effective |
|---|---|---|
| Tax rates | The seven TCJA brackets (10% to 37%) are permanent. For 2026 the 37% bracket for single filers starts above $640,600 of taxable income | Permanent |
| Standard deduction | Made permanent and increased: $15,750 single / $31,500 joint for 2025; $16,100 single / $32,200 joint / $24,150 head of household for 2026 | Permanent |
| Personal exemption | Zero, permanently | Permanent |
| SALT cap | Raised from $10,000 to $40,000 for 2025 and $40,400 for 2026, phasing down when MAGI exceeds $500,000 ($505,000 in 2026) to a floor of $10,000; reverts to $10,000 in 2030 | 2025 to 2029 |
| Senior deduction | $6,000 per person age 65 or older ($12,000 if both spouses qualify), phasing out above $75,000 MAGI ($150,000 joint); SSN required | 2025 to 2028 |
| Mortgage interest | $750,000 acquisition debt limit made permanent; mortgage insurance premiums deductible again from 2026 | Permanent / 2026 |
| Moving expenses | Elimination of the deduction and exclusion made permanent (except military and similar personnel) | Permanent |
New Deductions for Workers (Temporary, 2025 to 2028)
These are above-the-line style deductions available whether or not you itemize, claimed on Schedule 1-A. Married taxpayers must file jointly, and an SSN is required. Nonresident aliens filing Form 1040-NR are generally not eligible.
- Tips: up to $25,000 of qualified tips received in occupations where tipping is customary, phasing out above $150,000 MAGI ($300,000 joint). Restaurant and salon workers are typical beneficiaries; the tips must be reported on the W-2.
- Overtime: up to $12,500 ($25,000 joint) of the premium portion of overtime required under the Fair Labor Standards Act, with the same $150,000 / $300,000 phase-out.
- Car loan interest: up to $10,000 of interest on a loan for a new, personal-use vehicle with final assembly in the United States, phasing out from $100,000 MAGI ($200,000 joint) and eliminated at $150,000 / $250,000.
Families: Child Tax Credit, Trump Accounts, and Child Care
- Child Tax Credit: increased to $2,200 per child and indexed (still $2,200 for 2026, with a refundable portion of $1,700). In addition to the child’s SSN, the taxpayer (at least one spouse on a joint return) must now have an SSN. Parents with only an ITIN can no longer claim the credit, a significant change for some expatriate families.
- Trump Accounts: children born from 2025 through 2028 who are U.S. citizens with an SSN receive a $1,000 initial federal deposit if the parents elect on their return. Contributions are permitted from July 4, 2026, up to $5,000 per year (employer contributions up to $2,500 of that).
- Child care: from 2026 the dependent care FSA limit rises from $5,000 to $7,500, and the maximum Child and Dependent Care Credit rate rises from 35% to 50%.
- 529 plans: from 2026 the annual limit for K-12 tuition doubles from $10,000 to $20,000, and qualified expenses are broadened.
- Estate and gift tax: the basic exclusion rises to $15,000,000 in 2026 ($30,000,000 per couple), permanent and indexed. The annual gift exclusion is $19,000.
Business Owners and Freelancers
- QBI deduction (Section 199A): the 20% pass-through deduction is permanent. From 2026 the phase-in range widens to $75,000 single / $150,000 joint, and taxpayers with at least $1,000 of QBI from active businesses receive a minimum $400 deduction.
- Bonus depreciation: 100% bonus depreciation is permanent for property acquired after January 19, 2025. The Section 179 limit is $2,560,000 for 2026.
- Research costs (Section 174A): immediate expensing of domestic research and development costs is restored permanently.
- Information returns: the Form 1099-K threshold returns to more than $20,000 and more than 200 transactions, and the Form 1099-NEC/MISC threshold rises from $600 to $2,000 for payments made after 2025.
- Other: the excess business loss limitation is permanent, and from 2026 gambling losses are deductible only up to 90% of winnings.
Investors, Charitable Giving, and Other Items
- Charitable contributions: from 2026, non-itemizers can deduct cash gifts up to $1,000 ($2,000 joint). Itemizers face a new floor of 0.5% of AGI, and taxpayers in the 37% bracket see the benefit of itemized deductions capped at 35%.
- Remittance tax: from January 1, 2026, a 1% excise tax applies to international remittances funded with cash, money orders, cashier’s checks, or similar instruments, paid by the sender and collected by the provider. Transfers funded from bank accounts or U.S.-issued debit or credit cards are exempt, so remittances to Japan through account-based services are unaffected.
- Clean energy: the clean vehicle credits end for vehicles acquired after September 30, 2025, and residential clean energy credits end after 2025.
- Alternative minimum tax: from 2026 the exemption phase-out thresholds return to 2018 levels ($500,000 single / $1,000,000 joint) and the phase-out rate increases to 50%, which matters for high earners.
What Japanese Residents of the U.S. Should Check First
- Family SSN and ITIN status: the CTC now requires a parent’s SSN. Couples where one spouse has only an ITIN should revisit joint versus separate filing.
- SALT benefit: homeowners in New York, New Jersey, California, and other high-tax areas may save significantly by switching to itemized deductions.
- Expatriate moving costs and allowances: taxation of moving expenses is now permanent and flows into tax equalization calculations.
- Remittances to Japan: cash handed to a transfer agent is subject to the 1% tax; account-based transfers are not.
- Nonresidents (Form 1040-NR): the standard deduction and the tip, overtime, car loan, and senior deductions are generally unavailable.
Frequently Asked Questions
I missed one of the new deductions on my 2025 return. Can I fix it?
Yes, by filing Form 1040-X. The tip, overtime, car loan interest, and senior deductions are claimed on Schedule 1-A, so check your W-2 and supporting records before amending.
Do these changes affect U.S. citizens living in Japan?
The higher standard deduction, the CTC changes (SSN requirements for child and parent), the charitable deduction rules, and the larger estate tax exemption all apply to citizens abroad. The tip and overtime deductions presuppose U.S. employment and, in combination with the foreign earned income exclusion, offer limited practical benefit overseas.
When do the temporary provisions expire?
The tip, overtime, car loan interest, and senior deductions run through 2028; the expanded SALT cap through 2029 (reverting to $10,000 in 2030); and the $1,000 Trump Account deposit covers children born through the end of 2028. The standard deduction, rates, QBI deduction, bonus depreciation, and estate exemption changes are permanent.
This article is provided for general informational purposes only and does not constitute individual tax advice. Please review current IRS rules and consult a qualified U.S. tax professional before acting.
Summary
The OBBBA rests on a permanent foundation of TCJA-level rates, a larger standard deduction, the QBI deduction, bonus depreciation, and a $15,000,000 estate exemption, and adds a larger SALT cap, temporary deductions for tips, overtime, car loan interest, and seniors, a bigger Child Tax Credit with new SSN requirements, Trump Accounts, revised charitable rules, and a 1% remittance tax. For Japanese residents of the U.S., the family SSN requirements, the case for itemizing under the new SALT cap, the treatment of moving expenses, and how money is sent to Japan are the changes most likely to affect day-to-day planning. Note the expiration dates and prepare early for the 2026 filing season.
Related Articles
- Standard Deduction vs. Itemized Deduction in US Tax Filing: Which is More Advantageous for Japanese Individuals?
- Mastering Tax Savings for Families: A Comprehensive Guide to the Child Tax Credit (CTC) – Eligibility, Amounts, and Application
- How U.S. Property Tax Works and the SALT Deduction Cap: What the OBBBA Increase to $40,000 Means for Homeowners
- Immediate Expensing of R&D Costs Is Back Under the OBBBA (Section 174A): What Startups Need to Know, Plus the R&D Credit
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