Implications to Canadians of the One Big Beautiful Bill

Written by Adrienne Barclay | Taylor Leibow LLP

On July 4^th, 2025, the highly debated One Big Beautiful Bill Act (“OBBBA”) was signed into law.  The OBBBA includes a mix of tax cuts, reforms, and other tax provisions.  As a Canadian tax resident, you may believe the OBBBA does not affect you, however there are a few key provisions that Canadians should be aware of.

For Canadian individuals that are U.S. Citizens or have U.S. assets, including real estate and stocks, they will welcome the increased lifetime exemption for estate and gift tax.  The U.S. has increased the lifetime exemption amount per individual to $15 million USD (indexed for inflation) for decedents dying and gifts made after 2025.   Under the Canada U.S. Tax treaty, Canadian tax residents can claim a proportionate amount of the exemption against the U.S. Estate tax applicable on their U.S. assets.

In addition, individuals and trusts will benefit from an extension of the regular income tax rate schedules from the 2017 Tax Cuts and Jobs Act (“TCJA”) that were set to increase absent this policy change.  The top income tax rate will remain at 37%, down 2.6% from the scheduled increase.

For Canadian corporations operating in the U.S. either through a branch or a subsidiary, they will benefit from the reinstatement of 100% first-year bonus depreciation for qualified property acquired and placed in service after January 19, 2025.  This provision was set to be phased out starting in 2026 and eliminated by 2028.  In addition, a new provision was added that provides 100% expensing for certain non-residential real property used in qualified production activities.

In a sigh of relief for Canadians, the final bill passed had eliminated Section 899 which could have significantly increased taxes on U.S. source income for Canadian investors.  This section proposed retaliatory tax measures against foreign countries that impose “unfair foreign taxes” on U.S. businesses.

Other provisions of interest include:

• Expanded eligibility for the Qualified Small Business Stock gain exclusion on newly issued U.S. C-Corporation shares and an increase in the per issuer limitation to $15 million (up from $10 million).
• Permanently reinstated immediate expensing of “domestic” research and experimental expenditures.
• Modifications to the Global Intangible Low-tax Income (“GILTI) regime.
• An increase in the allowable deduction for state and local income taxes and property taxes for tax years 2025 through 2029 to $40,000.
• Announcement of a new type of individual retirement account called “Trump Accounts” for children under age 18. U.S. citizen children born in 2025 through 2028 will receive a one-time government funded $1,000 deposit.  Parents are permitted to make up to $5,000 of annual after-tax contributions.  These savings will grow tax deferred until withdrawn. Children can access the accounts once they reach age 18, but there may be early withdrawal penalties before age 59 ½ unless withdrawn for education or first-time home purchases.