Digital Nomad
Digital Nomads & the Foreign Earned Income Exclusion: What 2026 Changes Mean for Expats
Higher foreign earned income exclusion and new AMT thresholds under OBBB change the game for U.S. expats—here’s how digital nomads can save thousands.
By NomadicTax Research Team • 6 min read • November 19, 2025
## What’s Changing in 2026 for U.S. Expats
The One, Big, Beautiful Bill raised the **Foreign Earned Income Exclusion (FEIE)** for tax year 2026 to **$132,900**, up from about $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 relevant updates include higher standard deductions, larger AMT exemptions, and modified thresholds for fringe benefit and gift exclusions—all of which affect expats. ([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))
## Planning Strategies for Digital Nomads
### 1. Determine Physical Presence vs Bona Fide Residence
To claim FEIE, you must meet either the physical presence test or the bona fide residence test. Choose the qualification path that’s clearer for where you’re spending time in 2025-2026.
### 2. Maximize Foreign Housing Exclusion
In tandem with FEIE, if you have housing costs overseas, calculate the **foreign housing exclusion**. With FEIE higher, more income may qualify before tax kicks in.
### 3. Use Higher Deduction & Expense Thresholds Wisely
Higher standard deductions and AMT exemptions mean more of your income may be shielded. If you expect higher foreign or domestic income, considering business expenses or housing to itemize may pay off.
### 4. Foreign Tax Credits & Treaties
If you paid foreign taxes, use **foreign tax credit** rather than double-taxing. Understand the treaty provisions with your host country. Keep detailed records of foreign income and withholding.
## Example: Maria, the Software Developer Abroad
Maria works remotely from Luso, Portugal for a U.S. employer. In 2026,
- Her foreign salary is $130,000; she qualifies her full salary under FEIE ($132,900).
- She has foreign housing costs of $15,000; after applying foreign housing exclusion and other OBBB adjustments, her taxable income drops substantially.
- She also contributes to an HSA and 401(k), using their boosted 2026 limits.
## Actionable Advice Before your Next Trip
1. Track all travel dates in 2025 to ensure eligibility for physical presence test (you need 330 full days abroad out of any 12-month period).
2. Keep all housing and utility receipts.
3. Estimate U.S. tax using new FEIE and standard deduction to forecast your withholdings or quarterly estimates.
4. Consult with tax advisors familiar with both your home and host country treaties.