Digital Nomad
Entity Structuring for Digital Nomads under the New Tax Landscape
With OBBB changes and higher deductions, digital nomads can structure their income and entity registration to optimize savings and compliance across the U.S. and overseas.
By NomadicTax Research Team • 5-8 min read • November 15, 2025
## U.S. Rules Digital Nomads Should Know in 2025
While the One, Big, Beautiful Bill focuses on internal U.S. changes, digital nomads—those who earn remotely for U.S. or non-U.S. sources—should be aware of:
- **Foreign Earned Income Exclusion (FEIE)**: For tax year 2026, the exclusion is increased to **$132,900**, up from $130,000. Nomads should estimate whether FEIE or foreign tax credits yield better outcomes based on residence and income. ([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))
- **Entity Types & Deductions**: Use LLCs or S corps where beneficial. Entities that incur qualified passenger vehicle loans (used partially for business) may allow interest deductions. Keep business versus personal use well documented under section 163(h)(4). Under OBBB, only interest on passenger loans is deductible for personal use. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai))
## Structuring Income & Reporting for Offshore Work
- Establish **U.S. LLC** (if you are U.S. citizen or green card holder) taxed as pass-through entity—income flows to you; you get standard deduction or itemized deductions plus above business deductions.
- If you have non-U.S. clients, ensure you collect sufficient documentation to meet Form 1099-K thresholds if payments pass through U.S. settlement entities.
- Maintain separate records of business and personal expenses—especially vehicle use, internet, travel, software—to justify deductions under IRS rules.
## Practical Example
- **Example**: Maria is a U.S. citizen traveling abroad, contracting with clients worldwide. She sets up a U.S. LLC to bill clients. In 2025, she purchases a van (weighing <14,000 lbs), financing it for business & personal combined use. Under OBBB, she qualifies for deduction on interest paid. She bills $75,000 and wants to claim FEIE vs. foreign tax credit. Because FEIE limit is ~$130,000-132,900, she may fully exclude foreign income if qualifying, lowering U.S. tax exposure.
## When to Consider Different Entity Structures
- If business income is high and clients require U.S. payments, **C corportaions** might help with retained earnings.
- If you have income both from abroad and U.S., you may benefit from **S corp election** to avoid double self-employment taxes.
- Nomads should also plan for state tax obligations depending on domicile/home state—entity structuring can influence state apportionment.
**Category**: Digital Nomad
**TaxHome**: US
**Author**: NomadicTax Research Team
**ReadTime**: 5-8 min
**Published**: true