Thursday Thoughts
from Mary
at Matriarch Expat Tax
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Hi Reader,
As we roll into September 🍂 and (hopefully) cooler weather, I’ve got two fresh blog posts for our Matriarch community - both focused on helping U.S. expats make smarter tax moves abroad. The first reveals hidden downsides of the Foreign Earned Income Exclusion that might be costing you money, while the second explores the growing momentum around Residency-Based Taxation, the Pope, and where the latest legislation stands.
So, let’s chat about some updates, highlights, and articles to help you and your business stay “in the know” 🧐 and keep you updated on any important tax updates 💡 and news worldwide that may affect your expat life.
And in case you don't already follow Matriarch ....👇
⛪ What’s Good Enough for the Pope Should Be Good Enough for Us
Who would have thought that electing an American-born pope would stir up a tax debate? But that's exactly what happened when Cardinal [Name] became Pope Leo XIV earlier this year, and honestly, it's kind of fascinating.
Here's the thing: Congress is now seriously considering whether the pope should get a pass on U.S. taxes. And if you're one of the millions of Americans living abroad, you're probably thinking, "Wait, what about the rest of us?"
That's exactly what we're diving into in this blog. We're going to walk through how this whole papal tax situation is bringing citizenship-based taxation back into the conversation—and why that matters if you're an American trying to build a life overseas.
We'll cover everything from how we got here (spoiler: this debate has been brewing for years) to what's actually happening in Congress right now, plus what you should be keeping an eye on going forward. Because sometimes the most unexpected stories end up being the ones that actually change things.
Read the full blog ➡️ here
🥸 Hidden Downsides of the Foreign Earned Income Exclusion
If you're an American living and working abroad, you may be using the Foreign Earned Income Exclusion to avoid U.S. taxes on your salary. However, you might be missing some important trade-offs! When you exclude your foreign income, you also lose the ability to contribute to IRAs or Roth IRAs since excluded income doesn't count toward the contribution limits. (Hint: contributing to an IRA requires that you have taxable earned income, and when you exclude it using FEIE, it is no longer taxed). You'll also miss out on valuable tax credits like the Child Tax Credit and Child & Dependent Care Credit that could put money back in your pocket. Here's the real kicker for those in high-tax foreign countries: you can't claim a foreign tax credit for the hefty foreign taxes you're already paying on income you've excluded from U.S. taxes. This means you might actually save more money overall by claiming the foreign tax credit instead of excluding everything, especially if you're paying a lot in local taxes, want to contribute to a US retirement account, or have children. The key is running the numbers both ways or getting advice from a tax professional who understands expat situations.
Read the full blog ➡️ here
👀 The Subpart F Look-Through Rule Is Now Permanent
The One Big Beautiful Bill Act made permanent a tax rule that's been helping U.S. business owners with overseas companies for years. Here's what it means for you: if you own a foreign corporation and it receives dividends, interest, rent, or royalties from another foreign company you control, you might not have to pay immediate U.S. tax on that income. Previously, this "look-through rule" kept getting extended temporarily, creating uncertainty for tax planning. Now it's permanent under Section 954(c)(6). The IRS has built in some guardrails to prevent abuse – you can't use artificial transactions just to dodge U.S. taxes or get around other rules. The big win is that qualifying income often gets taxed at lower rates under the newer international tax system rather than the older, harsher Subpart F rules that immediately taxed foreign profits at regular U.S. rates. This change brings stability to long-term planning and generally helps keep the effective tax rate lower, which is a win for expat business owners managing international structures.
➡️ Read the full article here: TaxNotes
🤔 Canada's Economy Shrinks Amid Tariffs and Rate Cut Debate
Canada's economy contracted in Q2 2025, hit by U.S. tariffs hurting exports and falling business investment. Economists are split on whether the Bank of Canada should cut interest rates—some want cuts to boost growth, while others point to strong consumer spending and housing demand as reasons to hold steady, despite the mixed signals of weak wage growth alongside solid household spending.
➡️ Read the full article here: YahooFinance
🤝 US-EU Reciprocal Trade Framework Agreement
The U.S. and European Union have announced a new trade framework designed to make business between the two regions easier and fairer. The deal would eliminate many tariffs (taxes on imports) that both sides currently charge on industrial and farm products, with the U.S. specifically reducing some of the steel and car tariffs it imposed for national security reasons. Beyond just cutting trade taxes, the agreement also sets up cooperation on energy, cybersecurity, protecting intellectual property, worker rights, and digital commerce. The framework is meant to address unfair trade practices and remove other barriers that make it harder for companies to do business across the Atlantic, serving as a foundation for deeper economic partnership in the future..
➡️ Read the full article here: European Commission
That's all for today...
See you next month!
Mary 💗
