Digital Nomad
Digital Nomads & Remote Workers: Working Abroad under the One, Big, Beautiful Bill
New rules under the OBBB affect digital nomads in reporting foreign income, foreign earned income exclusion, and international credit treatments—here’s what remote workers need to know.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## What Digital Nomads Should Know Under OBBB
If you work remotely from abroad or split time offshore, OBBB brings changes that may affect your U.S. tax obligations—especially around the **foreign earned income exclusion**, credits, and exclusion thresholds. ([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))
### Foreign Earned Income Exclusion (FEIE)
For **tax year 2026**, the FEIE increases to **$132,900**, up from $130,000. That can reduce your taxable income significantly if you qualify. ([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))
### Tax Treaty & Credits for International Income
- If you hold foreign housing or other costs abroad, they may still be deductible—but the thresholds and phase-out rules shift due to inflation indexing. ([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))
- Claiming the foreign tax credit now requires more careful documentation because certain income types or exclusions may interact with new rules like the AMT adjustments or OECD/GloBE rules (for large multinational corporations, but remote workers may be affected indirectly). ([irs.gov](https://www.irs.gov/irb/2025-37_IRB?utm_source=openai))
### Residency & Reporting Obligations
- U.S. citizens & Green Card holders are taxed on worldwide income—FEIE helps but must meet bona fide residence or physical presence test.
- Foreign bank accounts & financial assets still need reporting via FBAR and Form 8938, unchanged—but utility amounts of income make reporting more likely under IRS scrutiny with higher thresholds. No specific digital nomad exclusion has been enacted. ([eitc.irs.gov](https://www.eitc.irs.gov/newsroom/topics-in-the-news?utm_source=openai))
## Practical Tips for Nomads
- Plan to establish your residence or presence abroad to meet FEIE criteria for the full tax year if possible;
- Keep meticulous records of foreign housing expenses, residence status, bank statements;
- Estimate taxes using updated thresholds (e.g., FEIE, standard deductions, AMT) after OBBB changes to avoid underpayment penalties;
- Consult with U.S. tax professionals versed in international tax law, especially if operating as an independent contractor or own a foreign company.
## Example
*Alex* lives in Portugal and earns $130,000 from U.S.-based clients. Under old rules, most could be excluded; under 2026 FEIE, $132,900 exclusion means Alex still excludes most, but must account for other income and foreign housing. If Alex also has investments abroad generating passive income, foreign tax credits may apply—just be ready with the correct documentation.
## Conclusion
OBBB provides noticeable relief for remote workers through inflation adjustments and FEIE increases—but it doesn’t change U.S. worldwide reporting obligations. Proper planning and documentation remain essential to avoid surprises.