Proposed US Income Tax Changes in ‘The One, Big, Beautiful Bill’ will make global mobility much more expensive

David Livitt, Partner said:

In US President, Donald Trump’s ‘The One, Big, Beautiful Bill’, there are a number of tax provisions, including a proposed incremental increase in U.S. tax rates starting at 5% and rising to 20% on income earned by residents of foreign countries deemed to have unfair tax regimes. This isn’t just a headline change, it’s a significant concern for global employers and employees.

These proposed tax changes could hit a wide range of individuals and businesses with international connections, particularly those moving in or out of the U.S. Those who may feel the pinch are:

People who’ve left the U.S. but still have U.S. income
Some individuals continue to earn U.S.-based income (like bonuses, stock payouts, or deferred compensation) even after leaving the country. Under the new rules, they may face higher tax rates, even though they no longer live or work in the U.S.

Employees on company-sponsored tax equalisation plans
Many globally mobile employees have their U.S. taxes covered by their employer. If tax rates go up, the employer pays more, increasing assignment costs and possibly affecting future mobility programs.

Employees moving to the U.S. mid-year
When people relocate to the U.S. partway through the year, they may not be considered full U.S. tax residents right away. Under the proposed changes, these individuals could be taxed more heavily during that first partial year.

Employees leaving the U.S. at year-end
Similarly, individuals who leave the U.S. during a tax year might lose their full resident status. Any income earned after they leave, like bonuses or stock vesting, could now be taxed at a higher rate.”

David said:

For companies with globally mobile employees, especially those who are non-U.S. residents or moving in and out of the U.S. the proposed tax hikes could make assignments significantly more expensive and individuals could face much higher U.S. tax bills simply because of when income is paid or where they live. And in many cases, the company foots that bill through tax equalisation.

But with the right planning, companies can reduce those costs and protect their mobility program:

Time payments wisely
Bonuses, stock payouts, or other compensation that would otherwise fall in a higher-tax year can be accelerated into 2025 before the new rates hit. This is especially helpful for employees leaving the U.S., relocating to the U.S. mid-year, or with trailing income after a move.

Review stock compensation schedules
If Restricted Stock Units (RSUs) or stock options are due to vest in early 2026, consider settling them before year-end 2025. This can prevent triggering the higher marginal rates or foreign surtaxes.

Consider the type of stock compensation you want to issue
Careful tax planning could involve issuing Incentive Stock Options (ISOs) to avoid compensation and ordinary income tax that normally applies to nonqualified stock options. However, be aware of certain limitations and triggering of alternative minimum tax.

Defer income after 2026 — where possible
Where employees will be in lower-tax situations in the future (e.g., post-assignment or post-retirement), consider deferring compensation until then. Deferred comp plans may help manage the tax timing.

Maximise tax-efficient benefits
Use employer-sponsored plans to reduce taxable income in high-rate years. Every dollar shielded helps, especially when companies may be absorbing tax equalisation costs.”

David concluded:

These proposed changes could significantly impact companies with mobile workforces and highly compensated employees. Now is the time for proactive planning to stay ahead of what could be a very different tax landscape in 2026.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or David using there form below.