Digital Nomad
Inflation-Adjusted Tax Changes for 2026 You Can’t Afford to Miss
The IRS has released major 2026 inflation adjustments under the OBBB—including new standard deductions, AMT thresholds and foreign income exclusion.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## What’s New for Tax Year 2026 Under the OBBB
On **October 9, 2025**, the IRS released **Revenue Procedure 2025-32**, establishing over 60 inflation-adjusted items for tax year **2026**, many introduced or changed by the **One, Big, Beautiful Bill**. These adjustments take effect for returns filed in 2027. ([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))
Key updates include:
- **Standard deduction** increases: $16,100 for single filers (up from $15,750), $32,200 for married filing jointly (up from $31,500), and $24,150 for heads of household (up from $23,625). ([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))
- **Foreign Earned Income Exclusion (FEIE)** rises to **$132,900** (from $130,000). ([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))
- New **Alternative Minimum Tax (AMT)** exemption amounts: $90,100 for singles, beginning phase-out at $500,000; married couples filing jointly begin phase-out at $1,000,000. ([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))
- Enhanced **Earned Income Tax Credit (EITC)**, updated **transportation fringe benefit limits**, childcare credits, health FSA limits, and gift exclusions. ([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))
## How These Changes Affect Planning for Digital Nomads & U.S. Expats
Digital nomads or U.S. citizens living abroad should note that the higher FEIE may reduce taxable income significantly if you qualify. The higher standard deduction may also give more cushion from U.S. tax liability if other deductions are limited.
Ensure your foreign housing costs and foreign-earned income calculations align with the new exclusion amount. Also plan for higher AMT thresholds if you have income streams that would have previously triggered AMT liability.
## Actionable Steps Before Year End
- **Estimate 2025 vs 2026** tax liability: A large prepaid expense or charitable contribution late in 2025 could reduce 2026 exposure; but with rising deduction thresholds, such strategies may shift in value.
- **Revisit withholding and estimated tax payments** for 2026 given wider standard deduction and possible shifts in bracket thresholds. Use IRS withholding estimator with new 2026 figures.
- **For high-income earners or those with AMT risk**, model whether bonus income or stock sales benefit from pushing into 2025 vs realizations in 2026.
## Practical Examples
- **Nomad earning U.S.-source income** abroad worth $120,000: With FEIE of $132,900 in 2026, foreign earned wages may be fully excluded if under that cap—no U.S. federal tax on those if other requirements met.
- **Family with one wage earner**, married filing jointly, previously claiming EITC with three children: a modest bump in maximum credit (from approx. $8,046 to $8,231) offers increased support. ([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))
These inflation adjustments provide critical planning levers—especially for non-resident Americans, remote workers, and anyone navigating cross-border tax scenarios.