Digital Nomad
Digital Nomad Guide: Foreign Earned Income Exclusion Increase & 1099-K Thresholds
Critical rule changes for remote workers abroad: how higher foreign income exclusions and shifting 1099-K thresholds affect overseas income and digital services.
By NomadicTax Research Team • 5-8 min read • November 14, 2025
## What’s Changed for Digital Nomads in 2025-2026
Two important changes affect individuals who earn abroad or via online platforms:
1. **Foreign Earned Income Exclusion** has increased from $130,000 in 2025 to **$132,900** for tax year 2026. This helps those who qualify for bona fide residence or physical presence tests exclude more income without owing U.S. tax.([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
2. **Form 1099-K Thresholds** under the One, Big, Beautiful Bill are reverting to pre-ARP standards: Third-party settlement organizations now only need to issue the form if payments over $20,000 and over 200 transactions.([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai)) This has immediate implications for gig economy work, content creation, or other digital service platforms.
## Actionable Advice for Nomadic Workers
- **Track foreign income carefully**: If you expect to fall under the physical presence test or bona fide residency, calculate whether the FEIE (Foreign Earned Income Exclusion) helps. Example: If you earn $130,000 from abroad, under new rule only $132,900 is excludable for 2026—so potentially all of it.
- **Maintain solid expense documentation**: Housing exclusions, travel, health, and insurance records will still be scrutinized. Use apps or cloud-based systems to log these in real time.
- **Side hustle income via platforms**: If you use marketplaces (e.g., Etsy, Fiverr) check whether you're receiving a 1099-K—it may not happen unless you exceed the 20k/200 threshold for 2025. But don’t ignore income: it’s still taxable.
- **Plan for 2026**: Starting in 2026, the threshold stage may change—stay updated with IRS - forms and fact sheets.
## Example Scenario
- **Maria lives in Medellín, Colombia**, and earns $120,000 in 2025 through remote consulting. Qualifies for FEIE, so her entire $120,000 may be excluded—keeping her U.S. tax minimal.
- **Carlos** sells print-on-demand merch via an app in 2025: receives $18,000 across 150 transactions. Under the reverted 1099-K threshold for 2025, he won’t receive a 1099-K, but must still report that income on Schedule C.
## Compliance Notes & Pitfalls
- Relying on exclusion or thresholds incorrectly (wrong residence test, use of personal vs. business income) can trigger audits.
- Keep dual-currency records for foreign income. IRS expects conversions using official rates.
- Monitor upcoming regulations—regulatory clarifications are issued often in Fact Sheets. For example, IRS Fact Sheet 2025-08 relates to 1099-K thresholds.([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai))
## Bottom Line
These rule changes give digital nomads better room for deduction and less friction for smaller platform incomes, but proper documentation and staying informed will separate compliant planning from missteps.