Digital Nomad
Digital Nomads & the Foreign Earned Income Exclusion: What’s New for 2025-26
New inflation adjustments and waivers for qualifying tests have reshaped how digital nomads are taxed. See updates to foreign housing limits and emergency waivers—so remote workers abroad can optimize their deductions.
By NomadicTax Research Team • 5-8 min read • November 16, 2025
## Foreign Earned Income Exclusion (FEIE): The Basics
Let’s briefly recap: U.S. citizens or residents who live and work abroad and meet **either** the bona fide residence test **or** the physical presence test may exclude certain foreign earned income (FEIE) and qualify for a housing cost exclusion. Under Section 911.([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
## What’s Changed in Mid-2025 and Beyond
- **Increased Foreign Housing Expense Limits for 2025**: IRC § 911 housing cost limits have been revised upward to reflect higher housing costs abroad. Digital nomads in high cost areas should check the latest tables for 2025.([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
- **Waiver of Time Requirements for Certain Countries**: If you had to leave a foreign country due to war, civil unrest, or similar adverse conditions (e.g. Ukraine, Iraq, Haiti, Bangladesh), you may qualify for a waiver of the minimum presence requirements for FEIE.([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
- **Foreign Earned Income Exclusion Floor Raised**: The FEIE maximum for 2026 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))
## Planning and Strategy for Nomads
**1. Time Your Travel and Moves**
If you expect to leave a country listed for waivers due to adverse conditions, coordinate your dates to ensure eligibility. Also, structure travel to meet the physical presence test (330 full days) if bonafide residence isn’t feasible.
**2. Choose Location Based on Housing Limits**
Housing cost ceilings vary by geographic area. If relocating, research areas with favorable housing limits. A high cost city might exhaust the exclusion quickly, so every cost matters.
**3. Document Everything**
Keep logs of days spent in each country, housing rental or lease documents, receipts for utilities, and proof of conditions (if claiming a waiver). These are crucial if audited.
**4. Forecast FEIE vs Itemizing Deductions Abroad**
In some cases, combining partial FEIE with foreign tax credits or itemizing overseas deductions may yield better tax outcomes than full exclusion. Use updated thresholds and inflation adjustments in calculations.
## Example
Jane, a U.S. citizen, lived in Kyiv until early 2025 but was forced to leave due to conflict. Under updated IRS guidance, she may be able to claim a **waiver of physical presence requirements**, enabling her to qualify for the FEIE even though she didn’t meet 330 full days. Also, if she rents a home abroad, her housing expense exclusion limit may be higher now, stretching this benefit further.([irs.gov](https://www.irs.gov/irb/2025-13_IRB?utm_source=openai))
## Final Takeaways for Digital Nomads
Inflation adjustments and waivers especially help U.S. expats and remote workers. • Keep tabs on the FEIE limit and housing expense tables • Monitor country-specific waivers if conditions apply • Maintain strong documentation • Project FEIE, housing exclusion, and foreign tax credit interactions before year end so migration or income shifts align with your tax optimization goals.