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) Additionally, there are revised housing expense limitations based on location, under IRS Notice 2026-25. (irs.gov)
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)
- 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)
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.
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.“
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.