Global mobility implications of the One Big Beautiful Bill Act

The recent passage of the United States' One Big Beautiful Bill Act (OBBBA) has meaningful international tax implications for global companies, with awareness needed on both the employee and employer sides. For global mobility professionals, the OBBBA is as notable for what it didn’t include ꟷ territorial taxation of citizens and a “revenge tax” on non-residents ꟷ than for what it did, such as a temporarily increased cap on the state and local tax (SALT) deduction and a tax on certain foreign remittances. 

The global mobility-related provisions in the OBBBA warrant closer review and modeling of cost implications for international businesses to better understand how the changes could impact their mobile employee population. The provisions included can be split into two key areas of impact ꟷ those that affect the company cost of global mobility, and those that impact the mobile employee’s experience.

Company tax costs

SALT deduction

The increased cap on the SALT deduction of up to $40,000 in 2025 applies to individuals earning up to $500,000, tapering to a floor of $10,000 for those earning $600,000 and higher. The cap and phasedown thresholds will increase annually by 1% through 2029, and then the cap will revert to $10,000 for 2030 and later years, without an income phasedown.

This change will provide many employees with the benefit of a reduction in their federal tax liability through higher itemized deductions where they exceed the standard deduction. This reduction in tax liability will impact the assignment tax cost of companies with tax-equalized employees from the U.S. where it reduces the hypothetical tax withholding the company retains from the employee. The reduced hypothetical withholding, taken as a deduction against income, will result in correspondingly higher taxable income in the country in which an employee works. This, in turn, will increase tax gross-ups and the associated assignment tax cost.

Consider, for example, a tax-equalized U.S. employee working in the UK with income subject to federal hypothetical tax withholding at a marginal rate of 32%. The increased SALT deduction from $10,000 to $40,000 will reduce hypothetical tax withholding by $9,600 with the corresponding tax gross-up, applicable at 45% UK income tax plus U.S. Social Security and Medicare, for an approximate 100% tax cost. The change potentially triggers a corresponding increase in tax cost to the company of approximately $20,000 per year.

Overtime pay deduction

The OBBBA created a new above-the-line deduction for up to $12,000 of qualified overtime pay for individuals ($25,000 for joint filers), which could impact employers with U.S. outbound expatriates whose employment terms provide overtime under the Fair Labor Standards Act, including those who are union members. This means certain industries may be more disproportionately impacted. This provision phases out beginning at income of $150,000 for individuals.

As with the above example, the loss of the hypothetical tax on this income plus the overseas taxation of the overtime income will increase taxable income in the host country and trigger a higher tax cost to the company.

Moving expenses

The OBBBA also makes permanent the taxation of moving costs for employees (with the exception of those in the intelligence community), removing hopes that this change from 2017’s Tax Cuts and Jobs Act (TCJA) would lapse and make the costs non-taxable again.

Employee experience impact

A 1% tax on remittances of money from the U.S. to overseas jurisdictions, beginning in 2026, may impact some employees who move to the U.S. and send money home, so mobility teams should review this change to determine the potential impact on their employees. 

However, in a significant change from earlier drafts, the tax applies only to “physical instruments” such as cash, money orders and cashier's checks, so the method of the remittance will be key to mitigating exposure to the tax. It does not apply to transfers from U.S. bank accounts or U.S.-issued debit or credit cards. Therefore, employees who make these transfers to foreign recipients where banks and other electronic remittances are less popular will be more impacted than those undertaking transfers between financial institutions.

For employers who agree to cover foreign remittance costs for internationally mobile employees by way of an allowance or direct reimbursement of transfer fees, employees whose transfers fall within the remit of the tax could seek reimbursement, making the cost of a move incrementally more expensive for the employer.

What was left out of the final bill?

Having worked as a successful negotiating tool for the government on the application of OECD Pillar 2 provisions to U.S. multinationals, the proposed Section 899 retaliatory taxes on “unfair foreign taxes” was removed from the final version of the OBBBA. This provision proposed increasing tax rates on non-resident taxpayers up to 20% on income from U.S. sources, albeit limited to tax on certain real estate transactions subject to the FIRPTA tax regime and payments on certain types of U.S.-source income that is not effectively connected with the conduct of a U.S. trade or business.

Despite a campaign promise by President Donald Trump to stop the “double taxation” of citizens resident outside the U.S., a move towards territorial taxation of U.S. citizens did not make it into the bill. 

An early 2025 proposal, before the OBBBA got underway, included provisions that would have excluded U.S. citizens from the scope of worldwide U.S. federal tax if they were resident outside the U.S. for at least three complete tax years. The absence of this change means U.S. citizens remain taxable on their worldwide income wherever they are resident and working, with mechanisms including a foreign tax credit and/or foreign earned income exclusion available to mitigate actual double taxation.

The big picture

As many taxpayers will find the OBBBA reduces their annual federal tax burden, so too will internationally mobile employees see benefit to their tax position, whether they are working in the U.S. or overseas on a tax equalized arrangement where they are held to the same U.S. tax burden to which they previously were subject. For their employers, the savings to employees will result in an increase in tax costs by way of the increased income subject to foreign tax and higher tax gross-ups. Businesses should plan now for the potential increase as the law’s changes come into effect.

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