Digital Nomad
How the “One Big, Beautiful Bill” Impacts Digital Nomads’ Foreign Income
For U.S. expats and digital nomads, tax year 2025 brings key changes under the One, Big, Beautiful Bill Act—especially for foreign earned income exclusion, standard deduction, and filing obligations. Here’s what you need to know before your next return.
By NomadicTax Research Team • 5-8 min read • March 11, 2026
## Overview of Key Changes for Expats & Digital Nomads
The One, Big, Beautiful Bill Act (signed July 4, 2025) introduces several tax revisions effective for tax years beginning after December 31, 2024. These include changes that directly affect digital nomads—those living abroad or earning internationally—both on income and eligible deductions. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions?utm_source=openai))
### Foreign Earned Income Exclusion (FEIE)
- For tax year 2026, the Foreign Earned Income Exclusion is **$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))
- Makes a difference for those whose income abroad is near or just above that threshold; once exceeded, excess is taxed at ordinary rates.
### Standard Deduction & Rates
- Standard deduction for **single or married filing separately** filers will be **$16,100** in 2026; for **married joint filers**, **$32,200**; for **heads of households**, **$24,150**. ([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))
- Marginal brackets shift upward due to inflation adjustments, potentially reducing taxes for many. ([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))
### Reporting, Credits & Deductions
- Additional deductions and credits are available retroactively to 2025, including an extra deduction for seniors, “no tax on tips,” and overtime. ([irs.gov](https://www.irs.gov/newsroom/taxpayers-could-see-a-change-in-their-2025-tax-bill-or-refund?utm_source=openai))
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) validity requirements tightened: for credits such as the Child Tax Credit, the SSN must be valid for employment **and** issued by the return’s due date, including extensions. ([irs.gov](https://www.irs.gov/newsroom/prepare-to-file-in-2026-get-ready-for-tax-season-with-key-updates-essential-tips?utm_source=openai))
## What Digital Nomads Should Be Doing Now
### Calculate AGI with All Foreign Income in Mind
Make sure to include all foreign wages, business income, and possible self-employment income while applying FEIE. If you exceed the threshold or your standard deductions reduce tax liability more than FEIE, strategize split compensation, expenses, or structure income accordingly.
### Check Residency & Tax Home Status
- Physical presence test (330 days in foreign country) or bona fide resident test—determine which applies to you and document accordingly.
- Beware changes in SSN/ITIN eligibility affecting credits and deductions.
### Use Updated Withholding and Estimated Payments
- Retroactive legislation means your 2025 tax filing might reveal overpayment opportunities: claim deductions you didn’t expect. ([irs.gov](https://www.irs.gov/newsroom/taxpayers-could-see-a-change-in-their-2025-tax-bill-or-refund?utm_source=openai))
- For 2026, adjust withholding or quarterly estimated payments to avoid surprises.
### Keep Records: Tips, Overtime, Vehicle Loan Interest
- Document tip income clearly: employer records or statements; required reporting under new “no tax on tips” deduction. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- Overtime compensation beyond regular rate – keep detailed records. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- Passenger vehicle loan interest: only loans from vehicle purchases (personal use), original use with the taxpayer, etc. Consider if some interest may qualify. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
## Example Scenario
> Jane, a digital nomad based in Spain, earned $140,000 in wages abroad in 2025, spent 340 days abroad (qualifying physical presence test). She has no U.S.-based income.
- She excludes $130,000 via FEIE for 2025.
- The remaining $10,000 is taxable by U.S. rates. With the raised standard deduction, Jane’s taxable income is further reduced.
- She can also claim no tax on qualified tips or overtime if she qualifies under those provisions. If Jane earned $30,000 in tips and $15,000 in overtime pay, those may partially or wholly be deducted—subject to income thresholds. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
## Action Plan Checklist
- [ ] Review your foreign income amounts and timing vs. FEIE limits.
- [ ] Confirm eligibility for “no tax on tips,” overtime deduction, and vehicle loan interest.
- [ ] Ensure SSN or ITIN requirements are met well before your filing deadline.
- [ ] Adjust estimated payments/withholding for 2026.
With these steps, digital nomads can make the most of new deductions and avoid unexpected tax liabilities under post-OBBB rules.