Digital Nomad
Digital Nomads and the Foreign Earned Income Exclusion: What Changed in 2026
For remote workers abroad, the increase in FEIE and related housing expense limits provides fresh leverage—learn how to maximize your benefits.
By NomadicTax Research Team • 5-8 min read • April 21, 2026
## What Remote Workers Need to Know in 2026
The One, Big, Beautiful Bill increases the **Foreign Earned Income Exclusion (FEIE)** to **$132,900** for tax year 2026, up from $130,000. ([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)) Additionally, there are revised housing expense limitations based on location, under IRS Notice 2026-25. ([irs.gov](https://www.irs.gov/irb/2026-17_IRB?utm_source=openai))
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## Key Provisions Impacting Digital Nomads
- **FEIE Increase**: The higher limit means more foreign income can be excluded from taxable income, expanding benefit for nomadic workers who qualify.
- **Housing Expense Cap Adjustments**: If living in a high-cost location (e.g., some foreign cities or special zones), nomads can use updated limits which may raise the deductible amounts. ([irs.gov](https://www.irs.gov/irb/2026-17_IRB?utm_source=openai))
- **Section 911 Timing**: New rules allow nomads to apply the 2026 limits to their 2025 filings if 2025 income is excluded using section 911, but only if the adjusted limitations are higher. ([irs.gov](https://www.irs.gov/irb/2026-17_IRB?utm_source=openai))
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## How to Qualify and Document Properly
- Meet the **Bona Fide Residence** or **Physical Presence** test under section 911.
- Pay attention to moving dates; rules for housing caps may differ depending on when you move to a new location relative to tax year.
- Keep **detailed records**: housing amounts, currency conversions, leases, utilities, local cost comparables. Documentation is essential in case of IRS review.
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## Case Study: Freelance Developer, Remote from Lisbon
**Scenario**: A US citizen who earns $140,000/year working fully remote from Lisbon, Portugal, has FEIE + housing costs.
- Without exclusion: taxed in full on entire income.
- With FEIE 2026 exclusion ($132,900): taxable income reduces to $7,100 + possible housing exclusion cap under Lisbon rates.
- Also must consider that their deductions for SALT itemized, etc., may now be less helpful than standard deduction.“
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## Actionable Tips for Nomads
- Plan your overseas stays to meet eligibility tests. The difference of a few days can matter.
- Compare housing limits for your specific city and use updated values. If limits rose, claim the higher amount.
- Use FEIE fully—exclude every dollar you can and maximize your one applicable housing limit.
- Talk to a tax advisor in both your country of residence and in the US—local rules may affect deductions and withholding.
**Wrap-Up**: The FEIE increase plus improved housing expense caps make 2026 a strong year for digital nomads to smartly reduce US tax liabilities—if you meet the tests and keep good records.