The Social Security Administration’s July 2025 message about the “One Big Beautiful Bill” (OBBB) led many Americans abroad to believe their Social Security would no longer be taxed. In reality, the law creates a targeted deduction for seniors 65 and older; it does not repeal the existing rules that can make up to 85% of benefits taxable. For most expats, long-standing cross-border tax tools already reduce or eliminate U.S. tax on benefits, while the separate repeal of WEP and GPO in early 2025 is the bigger win.
If that email left you confused, you’re not alone. The good news is that many Americans living abroad won’t owe U.S. tax on Social Security in the first place, and those hit by WEP/GPO are now seeing higher payments and retroactive adjustments.
What Does the “One Big Beautiful Bill” Actually Do for Social Security?
Enacted on July 4, 2025, the OBBB adds a temporary senior deduction that can reduce or eliminate federal income tax on Social Security for qualifying seniors. It is not a blanket tax repeal. Key points:
- $6,000 deduction for individuals age 65+; $12,000 if both spouses are 65+ and filing jointly.
- Phase-out begins above $75,000 income for individuals ($150,000 for joint filers).
- Applies 2025–2028 unless extended.
This deduction lowers taxable income but does not change the underlying rule that up to 85% of Social Security benefits may be taxable depending on combined income. You must also be 65 or older by year-end to claim it.
The Bigger Story: WEP and GPO Repeal Changes Everything
Separate legislation (the Social Security Fairness Act) eliminated the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) for benefits payable January 2024 and later, with the Social Security Administration processing retroactive adjustments and lump-sum catch-up payments in 2025. For expats with foreign pensions, this can meaningfully increase monthly benefits and restore spousal/survivor amounts.
What this means in practice
- WEP no longer reduces your own retirement or disability benefit due to a foreign pension.
- GPO no longer cuts spousal/survivor benefits because of a foreign government pension.
- Retroactive pay generally reaches back to benefits payable for January 2024.
How Expat Tax Protections Work with Social Security
Even before the OBBB, many Americans abroad could already avoid U.S. tax on Social Security by using existing provisions or because local law didn’t tax those benefits.
The Foreign Tax Credit Advantage
If your country of residence taxes your Social Security benefits, the Foreign Tax Credit (FTC) can offset U.S. tax dollar-for-dollar on the same income. Result: U.S. tax often drops to zero, with any excess FTC potentially carried forward.
Simple illustration
- U.S. tax on benefits: $800
- Foreign income tax on same benefits: $900
- FTC applied: $800 → U.S. tax $0; possible $100 FTC carryforward
Countries Without Social Security Taxation
Some jurisdictions do not tax U.S. Social Security benefits. In those cases, the new senior deduction can still help, but many expats wouldn’t have owed U.S. tax on benefits anyway once other rules and thresholds are considered. Always confirm local law or treaty treatment where you live.
The Foreign Earned Income Exclusion Connection
If you’re still working, the Foreign Earned Income Exclusion (FEIE) can exclude a substantial amount of salary or self-employment income, which may keep your overall U.S. liability low enough that Social Security ends up untaxed. For tax year 2025, the FEIE maximum is $130,000 per qualifying person.
What About That Confusing SSA Email?
On July 3, 2025, the SSA promoted the idea that nearly all beneficiaries would avoid federal income tax on Social Security under the new law. The claim drew criticism for blurring the distinction between a targeted deduction and a full repeal. The agency’s own blog frames the change as relief for nearly 90% of beneficiaries, but it does not replace the core taxation framework.
Your Next Steps as an American Expat
If you’re 65 or older:
- Check whether the senior deduction applies to your 2025 return.
- Verify your benefit amount post-WEP/GPO repeal and confirm any retroactive payment.
- Coordinate the deduction with FTC/FEIE to avoid unintended interactions.
If you’re under 65:
- Focus on WEP/GPO outcomes if relevant.
- Plan for future OBBB eligibility when you turn 65.
- Maximize current expat tools like the FTC and FEIE.
If you’re behind on filing, consider using compliant catch-up pathways and align them with any retroactive Social Security adjustments.
Common Expat Scenarios and OBBB Impact
Corporate Expats in High-Tax Countries
You likely rely on Foreign Tax Credits to eliminate U.S. tax on benefits. The senior deduction is a backstop, but often won’t change the final bill.
Retirees in Low-Tax Countries
Where local law doesn’t tax Social Security, the OBBB deduction can provide genuine savings if you meet the age threshold. Confirm local treatment first.
Digital Nomads Receiving Benefits
If you move between countries with different rules, the senior deduction provides consistent U.S. relief once you’re eligible, independent of where you’re living.
Recent WEP/GPO Beneficiaries
Higher monthly benefits after the repeal might nudge overall income upward; the deduction can help offset that if you’re 65+.
Important Tax Planning Considerations
For 2025:
- The OBBB senior deduction is in effect for 2025–2028.
- WEP/GPO retroactive payments for months after December 2023 may affect your 2024/2025 filings.
- Separate policy ideas (for example, proposals to curb “double taxation” or shift toward residence-based taxation) are not law yet; monitor developments.
Why Professional Help Matters More Than Ever
Cross-border returns combine Social Security rules, credits, exclusions, and now WEP/GPO changes. A planning session can prevent missed credits, avoid double counting, and time elections so you don’t accidentally increase tax elsewhere.
Take Action: Get Your Expat Taxes Done Right
Whether you’re clarifying the OBBB deduction, validating your post-repeal benefit, or coordinating FEIE/FTC, build a checklist for 2025 and document every assumption. When in doubt, get a second set of eyes from a practitioner who handles expat returns regularly.