Digital Nomad
Digital Nomads and the U.S. Tax System: What’s New for 2025-2026
With updates to foreign earned income exclusion, digital asset reporting, and new rules under OBBBA, digital nomads should reconsider income structuring and record-keeping strategies.
By NomadicTax Research Team • 5-8 min read • March 21, 2026
## Foreign earned income exclusion & what it means for nomads
For tax year **2026**, the foreign earned income exclusion is increased to **$132,900**, up from **$130,000** in 2025. This means that as a digital nomad earning abroad, you can exclude more earned income from U.S. taxation if you meet the physical presence or bona fide residence tests. ([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))
This increase helps offset inflation and higher costs abroad—but it doesn’t replace careful planning on deductions, housing exclusions, or foreign tax credits.
## Digital asset taxes and nomad exposure
- Final regulations require **brokers** to report dispositions of digital assets on **Form 1099-DA** beginning **January 1, 2025** (gross proceeds) and update basis information from **January 1, 2026**. If you use custodial exchanges, hosted wallets, etc., you’ll likely receive these forms; non-custodial or decentralized platforms may or may not be covered yet. ([irs.gov](https://www.irs.gov/newsroom/final-regulations-and-related-irs-guidance-for-reporting-by-brokers-on-sales-and-exchanges-of-digital-assets?utm_source=openai))
- The proposed move to permit **electronic delivery** of 1099-DA statements starting **after Jan 1, 2027**, with proper notice and consent, will reduce paper use but requires nomads to have digital access. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-to-make-it-easier-for-digital-asset-brokers-to-provide-1099-da-statements-electronically?utm_source=openai))
## Practical advice for the nomadic lifestyle
- **Maintain excellent records**: who paid you, when, via what platform; track basis and fair market value of digital assets in USD at each transaction.
- **Choose consistent tax home** and track time in and out of U.S. to satisfy physical presence or bona fide residence for foreign income exclusion.
- **Stay compliant with reporting**: even if you avoid U.S. federal income tax via foreign exclusion, you’ll still need to file Form 1040 and check boxes relating to digital asset income and disposition.
- **Use foreign tax credits** where tax is paid abroad—don’t lose out because you didn’t file in the foreign country.
## Case example
Sarah, a software developer living abroad, earned **$140,000** in wages overseas in 2026. Because foreign earned income exclusion is now **$132,900**, she can exclude that portion. The remainder ($7,100) may be taxed. But if Sarah also pays foreign tax on all $140,000, she might use foreign tax credits to reduce U.S. tax on the residual amount. If she receives crypto payments via a hosted wallet, she will need Form 1099-DA (or equivalent info) for her U.S. return.
By keeping up with new thresholds, digital asset reporting obligations, and foreign income rules, digital nomads can ensure they thrive financially, not run afoul of U.S. tax laws.