What’s New: One, Big, Beautiful Bill (OBBB)
The OBBB is a sweeping U.S. tax reform enacted in mid-2025. Key highlights include making permanent the individual income tax rate schedule in effect between 2017-2025 and updated child tax credits. (irs.gov)
How the OBBB Impacts Digital Nomads
Here are several areas that directly affect those living or working outside the U.S.:
- Foreign Earned Income Exclusion (FEIE), Foreign Tax Credit (FTC), and Treaty Benefits: The U.S. income tax rates and brackets remain locked in under OBBB. Changes to tax credits (e.g., child tax credit, standard deduction) may alter your effective tax liability even if you're using FEIE or FTC. (irs.gov)
- Form 1099-K Thresholds: IRS issued FAQs clarifying the $20,000 threshold (and number of transactions) for 1099-K reporting under OBBB. Nomads earning via platforms must track both gross amount and transaction count to see whether reporting kicks in. (irs.gov)
- Inflation Adjustments for 2026 Tax Year: IRS published Revenue Procedure 2025-32, adjusting thresholds for income tax rates, standard deductions, etc. If you expect income-driven brackets, this can shift your U.S. tax obligations even while abroad. (irs.gov)
Practical Tax Planning Strategies for Nomads
| Strategy | Why It Matters | Example |
|---|---|---|
| Use foreign tax credits effectively | To avoid double taxation with country of residence | If you paid 25% foreign taxes on foreign income, you can offset against U.S. tax liability on that same income (after exclusion) via FTC |
| Monitor 1099-K reporting thresholds | Avoid unexpected compliance burdens | Selling digital services with many small transactions could accidentally trigger reporting when volume crosses threshold |
| Optimize domicile/permanent home | State taxes may still apply | Changing state residency can reduce state-level tax liabilities when abroad |
| Track taxable days in each country | For foreign tax jurisdiction and U.S. treaty eligibility | If you spend 330 days in a year abroad, you can qualify under FEIE; tracking helps document eligibility |
Actionable Steps Right Now
- Review your projected 2026 income to assess which U.S. bracket and standard deduction apply under OBBB inflation adjustments. Use IRS 2026 preview tables. (irs.gov)
- If you're platform-based, log every transaction: date, amount, platform, gross vs. net. Assess whether Form 1099-K reporting applies. (irs.gov)
- Consult with a tax advisor about treaty rules with your host country—especially how FEIE, FTC, or treaty exclusion may work under OBBB.
- Revisit your state residency status if you’ve been abroad—some states have rules to maintain domiciliary tax even if physically absent.
Case Example
Jane, a digital marketer, works remotely while roaming Southeast Asia. She earns $80,000/year through international clients:
- Under OBBB, her taxable U.S. income could be reduced via FEIE ($120,000 in 2025). She also pays 20% local income tax in a Southeast Asian country.
- The foreign tax credit offsets her U.S. tax on the excluded income (beyond FEIE) up to the local tax rate applied.
- If she uses a platform that paid her per small-value transactions, she needs to check if she crossed 10 transactions totaling $20,000 for 1099-K reporting.
Bottom line: OBBB doesn’t eliminate U.S. tax exposure for nomads—it changes thresholds and reporting. Proper tracking, documentation, and treaty planning remain essential.
Category: Digital Nomad