Digital Nomad
Digital Nomads & The Foreign Earned Income Exclusion in 2026: What’s New
New inflation-adjusted limits and One, Big, Beautiful Bill (OBBB) changes for 2026 expand the foreign earned income exclusion, making tax planning for nomads more vital than ever.
By NomadicTax Research Team • 5-8 min read • June 21, 2026
## What’s Changed for 2026
The One, Big, Beautiful Bill (OBBB), signed into law on July 4, 2025, introduced sweeping changes to U.S. tax law. Notably for digital nomads, the **foreign earned income exclusion** has increased. For tax year 2026, the exclusion is now **$132,900** (up from $130,000 in 2025). ([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))
Other inflation adjustments include higher standard deductions, updated marginal tax rates, and expanded threshold amounts for different credits and deductions—elements that often interact with nomadic tax strategies. ([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))
## Why It Matters to Nomads
Nomadic workers who qualify under the bona fide residence or physical presence test can exclude foreign income up to this limit. With travel increasingly flexible and incomes rising in many remote roles, those on the cusp of the previous threshold may now benefit.
However, the OBBB also introduced deductions like **'no tax on overtime'** and **‘no tax on tips’** which complicate decisions about what income to exclude or include. Accurate tracking and eligibility become essential. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers?utm_source=openai))
## Actionable Planning Tips
- Record travel dates, workplaces, and time abroad meticulously to satisfy physical presence or residence tests.
- Track income streams—especially tips, overtime, and fringe benefits—if you take advantage of OBBB deductions instead of claiming a full exclusion.
- Re-evaluate foreign housing deductions; with overall adjustments to deductions and exclusions, combined housing costs may change tax-efficiency.
## Case Example
**Jules**, a U.S. citizen working remotely from Lisbon and Singapore, earns $150,000 per year. In 2025, under previous rules, only $130,000 could be excluded. In 2026, **$132,900** is excludable, so Jules pays federal taxes on roughly **$17,100** plus foreign housing costs. If lodging or housing allowance is generous, using OBBB deductions for overtime or tips may reduce taxable income more.
## Bottom Line
For digital nomads, the updates under OBBB and inflation adjustments in 2026 create both opportunity and complexity. Careful documentation, choosing the right combination of exclusions and deductions, and staying aware of new definitions—especially of “qualified tips” and “overtime”—will go a long way toward optimizing tax outcomes.