Introduction
For digital nomads juggling cross-border lifestyles, staying compliant in the U.S. can feel overwhelming. Recent changes under the One, Big, Beautiful Bill Act (OBBBA) are bringing clarity on deductions, limitations, and compliance obligations. Here’s what global nomads should know.
Key U.S. Policy Changes Relevant to Remote & Global Workers
1. Deduction for Qualified Overtime Compensation
- Under the OBBBA (Public Law 119-21), workers may deduct up to US$12,500 (US$25,000 if married filing jointly) of overtime compensation for tax years beginning after December 31, 2024 and before January 1, 2029.(irs.gov)
- New FAQs clarify limits, timing, and withholding obligations. Employers and payors should review what qualifies and issue correct reporting forms.(irs.gov)
2. Section 163(j) Business Interest Expense Limit Revisions
- OBBBA amended Section 163(j) to add back depreciation, amortization, or depletion (DAD) when determining adjusted taxable income (ATI) starting tax years after Dec 31, 2024. It also excludes income inclusions from controlled foreign corporations (CFCs) from ATI starting after Dec 31, 2025.(irs.gov)
- Proposed regulations from 2020 under Treas. Reg. § 1.163(j)-7(j) are no longer valid for tax years beginning after December 31, 2025.(irs.gov)
Implications for Digital Nomads
| Situation | Impact | Action to Take |
|---|---|---|
| Portable workers earning overtime income in U.S. | Qualify for “No Tax on Overtime” deduction up to limits | Track overtime income carefully; apply in U.S. returns; note withholding and employer reporting requirements |
| Nomads with U.S. business interest payments or asset-based income | ATI calculation more favorable due to DAD inclusion; exclusions for CFC income might reduce taxable base | Reassess financing structures; consider whether CFC income involvements create exposures; ensure understanding of depreciation/amortization deductions |
| Remote workers with shifting residencies | Tax treaties and physical presence rules still apply for residency and tax liability | Maintain records of location and days; consult treaty provisions if dual residency; ensure U.S. source income obligations met |
Compliance Tips & Best Practices
- Use tools or software to document daily location and work status—especially when crossing borders.
- Consult with tax advisors familiar with both home and U.S. jurisdictions when dealing with business interest or CFC topics.
- Keep business and personal finances separate—especially where interest expense or royalties are concerned.
- Plan ahead for treaty benefits and look for opportunities to use tax credits rather than just deductions.
Example Scenario: Nomad with U.S. Freelance Income & Investment Interest
Maria resides part-time in Spain, part- time in the U.S., and earns freelance income, plus interest on U.S. investment bonds. She works overtime for a U.S. employer occasionally. She can:
- Deduct qualified overtime under OBBBA (up to $12,500 if single).
- Inclusion of depreciation/amortization helps if she has related foreign business assets.
- Treat interest income carefully, watch for CFC rules if she has foreign corporations.
- Use tax treaty Spain-U.S. to avoid double taxation where applicable.
Conclusion: U.S. reforms under OBBBA are significant for digital nomads earning income through overtime or managing cross-border business or investment interests. By aligning work structure, reporting, and financial planning with new rules, nomads can reduce tax exposure and increase net earnings.