Digital Nomad
Digital Nomad Essentials: Foreign Earned Income Exclusion & Housing Cost Waivers for War-Affected Countries
For US citizens abroad in war-affected regions, the IRS has widened waivers to exclude foreign earned income even with interrupted residency—critical updates for digital nomads navigating tax homes overseas.
By NomadicTax Research Team • 5-8 min read • November 18, 2025
## Understanding Section 911 Foreign Earned Income Exclusion & Housing Exclusion
U.S. citizens or resident aliens living and working abroad are taxed on worldwide income but may **exclude foreign earned income up to a limit** (e.g. $126,500 for 2024) and deduct certain housing costs, if their tax home is abroad and they meet either the **bona fide residence test** or the **physical presence test**. ([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
## New Waivers for War, Civil Unrest, or Similar Adverse Conditions
Revenue Procedure 2025-17 now **adds Ukraine, Iraq, Haiti, and Bangladesh** to the list of countries where individuals whose foreign residence was interrupted due to war or civil unrest can still meet the time requirements for Section 911 tests. This waiver applies for **tax year 2024**. ([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
## Implications for Digital Nomads
- Digital nomads who temporarily leave an affected country in 2024 due to unrest still can satisfy the minimumtime tests without penalty. For instance, if you were living in Ukraine in 2024 but left due to conflict, you may still meet the bona fide residence test.
- Housing limitations (if higher than prior thresholds) in geographically expensive regions may be used if the adjusted limitation in the 2025 housing cost notice exceeds previous amounts. Qualified taxpayers may apply the higher 2025 housing limitations “retroactively” to tax year 2024 if beneficial. ([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
## Action Steps for Digital Nomads
1. **Check whether your country of residence is on the waiver list.** If you were forced to depart due to adverse conditions from Iraq, Ukraine, Haiti, or Bangladesh in 2024, you likely qualify for the waiver under Rev. Proc. 2025-17.
2. **Reassess your foreign earned income exclusion eligibility.** Use higher housing limitations if they apply. Compare with current numbers in Notice 2025-16. ([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
3. **Gather documentation.** Force majeure, evacuation or conflictrelated proof; lease or lodging invoices; payslips from abroad; proof of residence start/end dates.
4. **Tax return positioning.** If applying exclusion or housing cost deduction, include waivers in your 2024 tax return if eligible; look ahead to 2025 limits for planning.
## Practical Example
Maria lived in Kyrgyzstan (not on waiver list) throughout 2024, no issue. Sam lived in Haiti until August 2024 but left due to civil unrest. Under the waiver, Sam can count his time there toward physical presence or bona fide residence, so meets the test. Also, if Haiti’s housing cost limitation in 2025 (as published in Notice 2025-16) is higher, Sam may apply that to housing costs incurred in 2024 if doing so benefits his return.
## Bottom Line
Digital nomads should watch country-specific waivers, housing cost adjustments, and exclusion eligibility. These updates offer relief for those affected by conflict and help in maximizing excludable income abroad. With careful documentation and smart planning, these changes can meaningfully reduce U.S. tax exposure overseas.