Digital Nomad
Digital Nomad Visibility: Reporting Income & Deductions Under Recent U.S. Tax Code Changes
Remote work across borders introduces unique tax complexities. Here's how the latest U.S. changes affect digital nomads, from foreign earned income to expat deductions.
By NomadicTax Research Team • 5-8 min read • November 19, 2025
## What’s Changed for Foreign Earned Income & Expat Rules
The OBBB altered or clarified several types of deductions and thresholds that affect U.S. persons abroad or people working remotely for foreign or domestic entities. Notably, definitions of **foreign earned income exclusion** (section 911), housing deduction, and standard deductions remain crucial. Recent inflation adjustments impact many thresholds. ([irs.gov](https://www.irs.gov/irb/2025-42_IRB?utm_source=openai))
## Key Expat Obligations & Tax Planning Moves
- **Section 911 housing expense limits**: Adjusted for 2025 geographies; look up notices to see if your location qualifies for higher limits. Expense caps differ greatly by city. ([irs.gov](https://www.irs.gov/irb/2025-42_IRB?utm_source=openai))
- **Standard deduction remains same** for 2025 but grows for 2026. For many nomads, maximizing foreign housing deduction or exclusion may result in lower overall taxable income than relying mostly on standard deduction. ([irs.gov](https://www.irs.gov/irb/2025-45_IRB?utm_source=openai))
- **Foreign tax credit & treaties**: Understand how your foreign income is taxed abroad, and whether treaty benefits apply; this can lower double taxation.
## Examples & Scenarios
- **Nomad in Paris** on a U.S. passport earning €90,000: Determine whether housing costs qualify under section 911 adjustments for Paris; if high enough, you might reduce your taxable income significantly by claiming the higher limit. Use IRS Notice on housing for your foreign city. ([irs.gov](https://www.irs.gov/irb/2025-42_IRB?utm_source=openai))
- **Contractor for U.S. clients** residing in Bali: Consider timing of income recognition—if income arrives in late 2025 vs early 2026, inflation-indexed deductions or thresholds may shift your tax brackets.
## Tips to Keep Your Affairs in Order
- Keep detailed records of travel, lodging, and expenses related to your foreign residence—it determines eligibility for housing exclusion or deductions.
- Track your **days abroad** vs. home country days to meet bona fide residence or physical presence tests (if you use those).
- Use tax software or consult expat-specialized professionals to ensure you're not missing treaty-stipulated relief.
- Monitor IRS announcements: proposed regulations on “qualified tips” occupations, which may affect tip-earning nomads. ([irs.gov](https://www.irs.gov/irb/2025-42_IRB?utm_source=openai))
## Plan Ahead for 2026 Changes
- Inflation-adjusted standard deductions & rate brackets become effective for 2026—project income accordingly.
- Some new reporting thresholds and excise taxes kick in or become stricter; set up systems now.
- Consider transitioning contractors or employees to structured entities (LLC, foreign corporation) if income volume or location suggests benefits.
**Bottom line:** Digital nomads have more opportunity under the new law—but also more to track. Intentional planning and consistent recordkeeping will protect you and maximize benefit.