Digital Nomad
Smart Tax Moves for Digital Nomads: How the One, Big, Beautiful Bill Affects Foreign Earned Income Exclusion & Filing Rules
Digital nomads need to understand how recent U.S. tax changes under the One, Big, Beautiful Bill (OBBB) shift the rules around foreign earned income exclusions, withholding, and applicable deductions.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Introduction
The **One, Big, Beautiful Bill** (Public Law 119-21), signed into law on **July 4, 2025**, included a suite of inflation adjustments and tax policy changes that impact everyone—including digital nomads 🇺🇸🌍. If you live and work abroad, either full-time or part-time, these changes may affect what income you can exclude, what deductions and rates apply, and how you file.
## Key Changes That Affect Digital Nomads
| Area | What Changed Under OBBB | Implications for Digital Nomads |
|---|---|---|
| Foreign Earned Income Exclusion (FEIE) | For tax year **2026**, the FEIE increased to **$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)) | More income can be excluded, reducing taxable income for nomads with higher foreign wage earnings. |
| Standard Deduction & Tax Brackets | Standard deduction increased (e.g., $16,100 for single filers in 2026); brackets slightly adjusted. ([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)) | Adjust your withholding if abroad but maintaining U.S. address or if jointly filing; the higher standard deduction reduces overall tax liability. |
| Reporting Thresholds (1099-K) | The Form 1099-K threshold reverted to **$20,000 & more than 200 transactions**, removing the much lower threshold under ARPA. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai)) | If you're earning via online platforms or payment networks, fewer smaller transactions will trigger 1099-K reporting, simplifying books and returns. |
## How to Stay Compliant: Tips & Action Items
- **Maintain strong documentation** of your time abroad. To qualify for the FEIE (or Foreign Housing Exclusion), you must meet either the _bona fide residence test_ or the _physical presence test_. Keep travel records, lease/rental agreements, and proof of temporary or permanent residence abroad.
- **Watch for Form 1099-K incoming if thresholds met**. If you use platforms or payment networks that may issue 1099-K, track your gross payment volumes and number of transactions to avoid surprises. • Example: If you receive $25,000 via payments and more than 300 transactions through a marketplace and credit card network, you'll get the form. Otherwise, you're safe under the new threshold.
- **Adjust estimated tax payments and withholding**. With a higher exclusion limit and potentially lower taxable income, adjust your estimates to avoid overpaying (but don't underpay or risk penalties).
- **Take advantage of deductions and exclusions tailored to remote work**. For example, self-employed nomads may deduct home office expenses or other business-related travel costs under regular U.S. rules, even from abroad, when properly itemized. For those living abroad full time, some states may not tax them––review state and residency rules carefully.
## Practical Scenario
> **Case Study**: Jamie, a graphic designer, lives in Lisbon for 8 months of 2026 and earns $140,000 from U.S. clients through online platforms. She also receives earnings via small payment-network platforms totaling $19,000 across 180 transactions.
>
> With the updated FEIE ($132,900) she excludes that amount. Her remaining $7,100 is subject to U.S. tax, minus foreign housing deduction if she qualifies. She doesn’t receive a 1099-K form for the smaller platform activity because neither threshold is met. Her standard deduction (for single filer in 2026) reduces her taxable income further. She pays estimated tax for the remainder and stays compliant.
## Pitfalls to Avoid
- Relying on outdated FEIE or standard deduction numbers—you must use the 2025 rules until you file your 2026 return in 2027.
- Assuming state tax rules align with federal rules—they often don’t, especially for residency and exclusion.
- Forgetting to declare income from all sources, including digital platforms—even if under thresholds, records help in event of audit.
## Conclusion
OBBB brings meaningful changes benefiting many digital nomads: higher exclusion limits, increased standard deductions, and clearer thresholds for 1099-K. Stay informed, keep thorough records, and leverage professional guidance if your situation is complex. These policy shifts are powerful tools when used proactively.