Jul 3, 2023 Tax Pulse: Understanding Potential U.S. Tax Changes and Their Impact on U.S. Expats in Israel
As a U.S. expat residing in Israel, staying informed about potential U.S. tax changes is crucial. The American legislative landscape currently sees the possible introduction of three tax bills that could significantly impact U.S. taxpayers. Although it’s still being determined whether they’ll pass in their current form, it’s worth understanding these proposed changes and how they could impact U.S. citizens in Israel.
The American Families and Jobs Act
The American Families and Jobs Act, spearheaded by U.S. House Ways & Means Committee Chairman Jason Smith, comprises three separate bills – the Tax Cuts for Working Families Act, the Small Business Jobs Act, and the Build It in America Act.
Notably, the Tax Cuts for Working Families Act proposes to increase the standard deduction through a “guaranteed deduction bonus” for taxpayers earning less than $400,000 in adjusted gross income for 2024 and 2025. The “guaranteed deduction” is nothing new and is just a change of the Standard Deduction everyone gets. This additional bonus amount may be helpful. However, this bill doesn’t offer relief from the $10,000 cap on the state and local tax (SALT) deduction nor extend the Child Tax Credit (CTC). There is an added factor to keep in mind for U.S. expats in Israel, who often juggle the complex interplay of American and Israeli tax systems. These bills often don’t get passed, and when they do, heavy revisions occur first. In some of the added benefits of increased CTC, like the $3,000 increased amount for 2021, people living outside the U.S. were left out. We need to wait and see if any increased standard deduction will apply to those U.S. citizens living outside the U.S.
The Small Business Jobs Act
Concurrently, the Small Business Jobs Act intends to relieve workers and small businesses navigating challenges in today’s economy. This legislation could notably increase the 1099 reporting threshold for services performed by individual contractors or subcontractors from $600 to $5,000, potentially reducing the administrative burden for businesses. This change would be a welcome relief for many of our hi-tech clientele, who often have to file many of these forms at the beginning of each year.
Build it in America Act
Lastly, the Build It in America Act would roll back several clean energy tax incentives, which could affect investments in clean energy projects. This one is less likely to impact those living in Israel but could impact the venture capital world and the values of their EV investment companies. It is unlikely to sway the market all that heavily, though, one way or the other.
While these bills present notable potential changes, we emphasize that their passage isn’t guaranteed. There is opposition regarding various aspects, and revisions are likely. Additionally, since no party controls all three legislative branches, it is much harder to pass anything currently.
Here at Philip Stein & Associates, we’re keeping our fingers on the pulse of these legislative changes. Although the tax landscape can be complex, particularly for U.S. citizens in Israel, we’re committed to keeping you informed and helping you navigate any changes. Stay tuned for updates on the progression of these bills and other relevant tax news.