Digital Nomad
How Digital Nomads Can Navigate the US ‘Working Families Tax Cuts’
Recent changes under the US One, Big, Beautiful Bill (Working Families Tax Cuts) have rewritten rules on payments via third-party platforms and credits—digital nomads need to understand how thresholds and deductions may affect them.
By NomadicTax Research Team • 5-8 min read • July 16, 2026
## What Changed Under the Working Families Tax Cuts Bill
In late June 2026, the IRS rolled out sweeping changes via the One, Big, Beautiful Bill (OBBB), including:
- **Backup withholding thresholds raised** for certain third-party network transactions: under the updated system, backup withholding only applies when *both* of the following are true in a calendar year: payments exceed **$20,000**, *and* the number of transactions exceeds **200**. This replaces the scheduled $600 threshold. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
- **Additional first-year depreciation** permanent rules under §168(k): qualified property acquired and placed in service **after January 19, 2025** qualifies for a **100% deduction**; certain categories like sound recording productions are now allowed retroactively under interim guidance. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
- Changes to eligibility and timing of several credits—especially those relevant to labor, seniors, overtime, tax on car loan interest, etc. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
## What Digital Nomads Should Watch Out For
Digital nomads often receive income via platforms (Fiverr, AirBnB, Upwork, etc.), move between tax jurisdictions, and have mixed in-country and foreign income. Here’s how recent US changes could affect you:
| Situation | Old Rule | New Rule | Impact |
|---|---|---|---|
| Payments via third-party platform | Backup withholding often triggered if *either* threshold exceeded (e.g. $600). | Now requires *both* thresholds (200 transactions *and* $20,000) to trigger withholding. | Low-volume, high-value users may no longer face withholding unless both conditions met. |
| Acquisition of business or equipment in US | Limited to 100% additional first-year depreciation if acquired before Jan 1 2027. | Now **permanent 100% first-year depreciation** for qualifying property after Jan 19, 2025. | Great benefit for nomadic businesses that purchase equipment. |
| Eligibility for credits | OBBB changed eligibility criteria for numerous credits. | Some credits more restrictive, others expanded. | Need to check updated thresholds per credit. |
## Practical Steps You Can Take Today
- **Track your transactions**: If you use platforms, monitor both the *number* of payments *and* total amounts to assess whether backup withholding might apply to you.
- **Document purchase dates** of any equipment or assets—if acquired after Jan 19, 2025, you may qualify for 100% depreciation under §168(k).
- **Review your deductions and credits**—things like eligibility for no tax on overtime, child-related credits, etc., may have changed; ensure your filings reflect current rules.
- **Declare foreign income properly**, especially if foreign earned income exclusion or treaties apply—US nomads need to ensure home country rules align.
- **Stay aware of scams**: with new rules, fraudulent preparers may try to mislead nomads with promises of inflated refunds. The IRS explicitly warns about such schemes. ([irs.gov](https://www.irs.gov/newsroom/irs-reminds-taxpayers-watch-out-for-preparers-promising-quick-cash-fast-refunds-under-new-one-big-beautiful-bill-tax-changes?utm_source=openai))
## Example: A Nomad Scenario
Let’s say Sarah, a digital nomad, provides software consulting via a platform. She receives 250 small payments totaling $15,000 for the year.
- Under the *new backup withholding rule*, she **does not** meet both thresholds yet (number of transactions yes, total dollars no), so backup withholding should *not* apply. Previously, payments over $600 alone could trigger it.
- She buys new laptop equipment costing $5,000 in Fall 2025. Since it's placed in service after Jan 19, 2025, she qualifies for **100% first-year depreciation** under OBBB, reducing her taxable income significantly.
## Key Takeaways
- The threshold for backup withholding has become **stricter** in terms of dual requirements.
- Depreciation benefits are **generally more favorable** for nomadic businesses purchasing property.
- Watch for updated eligibility criteria on credits and deductions.
- Always maintain documentation—both of transaction counts/amounts and asset acquisition dates.
- Consult with a tax professional familiar with cross-border or nomadic lifestyles.
By staying on top of these changes, digital nomads can reduce surprises and optimize their tax position under the new US rules.