The United States recently passed tax legislation called the One Big Beautiful Bill Act (OBBBA), a follow-up to the 2017 Trump tax cuts. While the bill is American, many Canadian families with cross-border ties, including U.S. real estate, investments, or business interests could be directly or indirectly impacted.
This article breaks down the key changes in the U.S. bill and what they could mean for high net worth Canadians.
Estate, Gift, and GST Tax Exemptions
What changed?
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The lifetime exemption for U.S. estate, gift, and generation-skipping transfer (GST) taxes has more than doubled — from about $7 million USD to $15 million USD per person ($30 million USD for married couples), adjusted for inflation. This means Americans (and some Canadians) can transfer significantly more wealth without triggering U.S. tax. |
Does this affect Canadians?
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Yes, if you own U.S. property or other U.S.-based assets (real estate, business interests, or stocks).
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Advantage
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You may be able to pass on U.S. assets tax-free, (but only while the exemption lasts).
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Limitation
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Canadian tax still applies at death, and U.S. rules can change after the next election.
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Planning Tip
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Consider gifting or restructuring U.S. assets now to take advantage of the higher threshold before it possibly expires in 2026.
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Ask Yourself
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Do I own U.S. real estate or investments?
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Will my estate face U.S. taxes?
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Miscellaneous Itemized Deductions (Advisory, Legal, and Tax Fees)
What Changed?
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The bill removes the ability to deduct certain personal expenses like legal fees, investment advisory costs, and tax preparation fees on individual U.S. tax returns, even if they are related to wealth planning. |
Does this Affect Canadians?
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Only if you are paying for U.S.-related advisory services or operate a U.S. trust/entity.
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Advantage
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You can still deduct these costs through U.S. businesses or trusts if structured properly.
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Limitation
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If paid personally, they are no longer deductible under U.S. tax law, increasing your effective cost.
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Planning Tip
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Consider paying U.S.-based planning fees through a corporate or trust structure where they may still be deductible.
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Ask Yourself
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Are my U.S.-based planning costs structured efficiently for tax purposes?
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Opportunity Zones (U.S. Investment Tax Breaks)
What Changed?
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The bill relaunches and expands Opportunity Zones, which allow investors to defer capital gains by reinvesting in designated areas, which now include rural zones. Holding the investment long enough may result in partial or full tax exemption on future gains.
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Does this Affect Canadians?
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Yes, if you invest in U.S. real estate or startups in these zones. |
Advantage
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Possibility to defer or eliminate U.S. capital gains tax. |
Limitation
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The CRA may not recognize the deferral, meaning you could still owe Canadian tax now.
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Planning Tip
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Before investing, confirm whether the CRA will recognize the deferral or exemption, and if the structure fits your long-term goals.
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Ask Yourself
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Will I still owe Canadian tax on my U.S. investments?
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Bonus Depreciation (Capital Asset Write-Offs)
What Changed?
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U.S. taxpayers can write off 100% of the cost of big-ticket purchases, meaning businesses and individuals can immediately deduct the full cost of qualifying assets (e.g. equipment, aircraft, machinery) in the year they are placed in service. This measure is effective January 19, 2025.
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Does this Affect Canadians?
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Yes, if you own or lease U.S. business assets or equipment.
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Advantage
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Big U.S. tax savings in the year of purchase, improving cash flow and ROI.
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Limitation
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The CRA may not align with the timing, potentially leading to future tax consequences in Canada. |
Planning Tip
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Align U.S. and Canadian depreciation where possible; consider asset ownership structure carefully.
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Ask Yourself
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Is my business taking full advantage of these write-offs without causing Canadian tax issues?
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Business Interest Deduction (Now Based on EBITA)
What Changed?
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Previously, U.S. tax rules limited business interest deductions to a percentage of EBITDA (earnings before interest, taxes, depreciation, and amortization). Now, it’s based on EBITA, excluding depreciation from the calculation, making more interest deductible.
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Does this Affect Canadians?
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Yes, if you own a business in the U.S. or borrow funds through a U.S. structure.
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Advantage
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You can deduct more interest in the U.S., reducing taxable income.
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Limitation
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CRA might not allow the same deductions, risking double taxation.
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Planning Tip
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Clearly separate and document interest tied to U.S. income.
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Ask Yourself
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Are my business loans properly allocated for both tax systems?
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Qualified Business Income (QBI) Deduction – 20% Break
What Changed?
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This 20% deduction originally limited to some U.S. taxpayers, is now expanded to more types of income and higher income brackets. It applies to pass-through income from eligible U.S. businesses.
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Does this Affect Canadians?
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Yes, if you own or earn income through a U.S. LLC, partnership, or similar entity.
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Advantage
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Potential 20% tax break on eligible U.S. income.
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Limitation
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This income is still fully taxable in Canada, which may cancel out the U.S. benefit.
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Planning Tip
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Run a cross-border tax simulation before claiming this benefit. Coordinate your entity structure and compensation strategy to ensure you qualify and avoid duplication of tax.
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Ask Yourself
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Is the U.S. deduction worth it once I factor in Canadian taxes?
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Qualified Small Business Stock (QSBS)
What Changed?
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The capital gains tax exclusion on QSBS is now more generous: investors can exclude up to $15 million USD in gains from federal tax if they invest in qualifying U.S. startups and hold the shares for five years.
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Does this Affect Canadians?
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Yes, if you invest in qualifying U.S. early-stage companies.
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Advantage
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Tax-free gains in the U.S. after five years could be substantial.
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Limitation
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Canada may still tax the gains unless careful planning is done.
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Planning Tip
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Clarify with your advisor whether Canada will recognize the exemption or how to minimize double taxation.
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Ask Yourself
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Will I benefit more from a Canadian or U.S. investment structure?
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Can I benefit from the U.S. tax break without creating a larger Canadian tax bill?
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State and Local Tax (SALT) Deduction Cap Increase
What Changed?
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The bill raises the cap on state and local tax deductions to $40,000 USD through 2029 (up from $10,000 USD), but only for households earning under $500,000 USD.
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Does this Affect Canadians?
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Yes, if you file U.S. taxes and pay state/local tax (e.g. a U.S. rental property or partnership).
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Advantage
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Larger deductions reduce U.S. income tax.
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Downside
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This cap is temporary, and the CRA doesn’t recognize the deduction, only foreign tax credits.
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Planning Tip
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Look into whether your structure (e.g. using a U.S. entity) allows you to benefit more fully from the deduction.
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Ask Yourself
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Are my U.S. tax filings optimized to make use of this change?
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Are we paying state taxes that could be reduced under the new cap?
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Conclusion
While the One Big Beautiful Bill Act is U.S. legislation, its ripple effects reach beyond American borders — with real implications for Canadian high net worth families with U.S. assets or cross-border plans. Whether you are investing, owning property, running a business, or planning your estate, these changes bring both opportunity and risk, depending on how you respond.
The Cozen O’Connor Canadian Family Practice and Canadian/U.S. Cross Border team provides proactive, integrated strategies to help you navigate these changes and make informed decisions with confidence.
To learn more about how the OBBBA is reshaping U.S. tax rules, read more from the Cozen O’Connor Tax group: