Digital Nomad Taxes: What U.S. Citizens Working Remotely Abroad Need to Know in 2026
- Do I Really Need to File U.S. Taxes If I'm Living Abroad?
- What's the Physical Presence Test and Why Does It Matter?
- Can I Exclude All My Income from U.S. Taxes?
- Does Self-Employment as a Digital Nomad Change My Tax Situation?
- Do I Need to Pay Taxes Where I'm Actually Living?
- Should I Worry About U.S. State Taxes as a Digital Nomad?
- What Forms Do I File as a Digital Nomad and When Are They Due?
- How Do I Track My Days Abroad as a Digital Nomad?
- What If I Moved Abroad Halfway Through the Year?
- What If I Haven't Filed in Years?
- What Should I Do Next as a Digital Nomad? Where Do I Start?
- Get Help From People Who Live This Lifestyle
- Related Resources
Picture this: You’re sipping coffee at a cafe in Lisbon, finishing up a client project before heading to a coworking space in Bali next month. Your income is generated from U.S. clients, European contracts, and possibly some passive revenue streams. Life is good. But somewhere in the back of your mind, a question keeps surfacing: “Am I supposed to be doing something about taxes?”
Here’s what most digital nomads don’t realize until it’s too late: You need to file U.S. taxes every year, even if you haven’t been back to the States in months. The good news? According to IRS data, roughly two out of three American expats owe absolutely nothing in U.S. federal income tax after utilizing available exclusions and credits. The same relief applies to you.
The U.S. uses citizenship-based taxation, which means your tax obligations travel with your passport. But here’s the part that brings immediate relief: if you spend at least 330 full days outside the U.S. in any 12-month period, you can exclude up to $130,000 of foreign earned income from U.S. taxation. For most digital nomads, that means filing your return but owing $0 in federal income tax.
This guide walks you through exactly what you need to know, do, and track to file correctly and minimize or eliminate your U.S. tax bill while maintaining your location-independent lifestyle.
Do I Really Need to File U.S. Taxes If I’m Living Abroad?
Yes, and this surprises almost every digital nomad the first time they hear it. If you’re a U.S. citizen earning more than $13,850 (for single filers under 65 in 2025), you must file a U.S. federal tax return regardless of where in the world you earned that money or where you’re physically located on April 15.
Think of it this way: other countries’ taxes are based on where you live. The U.S. taxes based on the passport you hold. So even if you’re working from a laptop in Portugal for a German company while your business is registered in Estonia, Uncle Sam still expects to hear from you each year.
But filing doesn’t mean paying. This is the critical distinction that gives most digital nomads relief. The Foreign Earned Income Exclusion exists specifically to prevent you from being taxed twice on the same income. For the 2025 tax year (filed in 2026), you can exclude up to $130,000 of foreign earned income from U.S. federal income tax. If you’re earning less than that and you pass the Physical Presence Test, your federal tax bill will likely be $0.
Traveling full-time and unsure how your taxes work as a digital nomad?
What’s the Physical Presence Test and Why Does It Matter?
The Physical Presence Test is probably the most important concept you’ll learn as a digital nomad. Pass this test, and you unlock the Foreign Earned Income Exclusion. The requirement is simple: be physically present in foreign countries for at least 330 full days during any 12-month period.
Notice what’s NOT required:
- You don’t need to stay in just one country
- You don’t need to establish permanent residence anywhere
- You don’t need to prove you’re never coming back to the U.S.
- The 12-month period doesn’t have to match the calendar year
This flexibility makes the Physical Presence Test perfect for digital nomads. You can bounce between Thailand, Portugal, Mexico, and Bali, and as long as you’re outside the U.S. for 330 full days within any consecutive 12 months, you qualify.
The catch: A “full day” means the entire 24-hour period outside the U.S. If you land in Miami at 11:55 PM on December 15, that entire day doesn’t count toward your 330. Even one second on U.S. soil disqualifies the day. This is why tracking matters so much.
Quick example: Sarah is a freelance designer who spent 2025 working from coworking spaces across Southeast Asia and Europe. She came back to the U.S. for 28 days in July for a family wedding. She carefully tracked every single day and confirmed she spent 337 full days outside the U.S. from March 2025 through February 2026. She passes the Physical Presence Test for 2025, which means she can exclude her entire $95,000 income from U.S. federal income tax.
The moment you start living this lifestyle, start tracking your days. Use a spreadsheet, calendar app, or travel journal to track your expenses. Document every border crossing, every flight, every move. Your future self will thank you when tax season arrives.
Can I Exclude All My Income from U.S. Taxes?
For most digital nomads, yes. The Foreign Earned Income Exclusion covers up to $130,000 for the 2025 tax year. If both you and your spouse work abroad and both qualify, that’s up to $260,000 in excluded income.
What qualifies as “foreign earned income”:
- Salary or wages from any employer (U.S. or foreign) for work performed while you’re physically abroad
- Freelance income and consulting fees for work done outside the U.S.
- Self-employment income from your online business while living abroad
- Bonuses and commissions for services you performed in foreign countries
What doesn’t qualify:
- Investment income (dividends, interest, capital gains)
- Rental income from properties
- Retirement distributions or Social Security
- Any income from work you did while physically in the U.S.
Here’s a scenario that confuses people: You’re working remotely from Lisbon for a company based in San Francisco. That income is foreign-earned because you performed the work while physically outside the U.S. It doesn’t matter where the company is located or where they deposit your paycheck.
To claim this exclusion, you’ll file Form 2555 with your tax return. This form does the math based on how many qualifying days you spent abroad.
Does Self-Employment as a Digital Nomad Change My Tax Situation?
Yes, and this is where many digital nomads get surprised. If you’re freelancing, consulting, or running your own business, the Foreign Earned Income Exclusion will eliminate your federal income tax, but it won’t touch your self-employment tax.
Self-employment tax covers Social Security and Medicare and runs at 15.3% of your net business income (12.4% for Social Security on income up to $176,100 in 2025, plus 2.9% for Medicare on all income). You owe this regardless of where you are working in the world.
Real numbers: Marcus runs a digital marketing consultancy and earned $85,000 in 2025 while traveling through Europe. He qualifies for the full Foreign Earned Income Exclusion and excludes all $85,000 from federal income tax. His federal income tax? $0. But he still owes approximately $13,005 in self-employment tax.
One important exception: If you’re living in a country with a U.S. totalization agreement and you’re paying into their social security system, you might be exempt from U.S. self-employment tax. Countries like Germany, France, Spain, and Canada have these agreements. You’ll need to obtain a Certificate of Coverage from the Social Security Administration of that country to prove it.
Popular digital nomad destinations, such as Thailand, Mexico, Portugal, Indonesia, and Costa Rica, don’t have totalization agreements with the U.S. If you’re based in one of these countries, you’ll pay U.S. self-employment tax on your business income regardless of whether you’re also paying local social insurance.
Do I Need to Pay Taxes Where I’m Actually Living?
Maybe. It depends on how long you stay and what that country’s tax laws say. Most countries use residence-based taxation, which typically kicks in after you’ve been there for 183 days in a calendar year.
If you’re constantly moving (less than 183 days in any single country), you probably won’t trigger tax residency anywhere outside the U.S. This is common for digital nomads who spend 2-3 months in each location. You’d file your U.S. return with the Foreign Earned Income Exclusion and potentially owe nothing to any country.
If you settle in a country (for more than 183 days), you’ll likely become a tax resident there and may be liable for taxes to that country. High-tax countries like Germany, France, or Portugal might tax your worldwide income. The good news: you can use the Foreign Tax Credit to offset your U.S. taxes dollar-for-dollar with whatever you paid abroad. Many expats in high-tax countries end up owing zero to the U.S. after applying this credit.
Tax-friendly destinations: Certain countries actively attract digital nomads with specialized visa programs and favorable tax policies. Places like Panama, Costa Rica, the UAE, and Georgia often exempt foreign-sourced income for certain visa holders from taxation. Each country’s digital nomad visa program has different rules, so check the specifics before you assume anything.
Should I Worry About U.S. State Taxes as a Digital Nomad?
Possibly, and this one catches a lot of digital nomads off guard. Some states are aggressive about maintaining tax jurisdiction over former residents. California, Virginia, New York, and South Carolina are notorious for this.
You might still owe state taxes if you left behind ties like a driver’s license, vehicle registration, property ownership, a bank account, a mailing address (even your parents’ house), or voter registration in that state.
Smart digital nomads establish residency in one of the seven states with no income tax before going abroad: Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming. Get a driver’s license there, register to vote there, and use an address there. Document everything. This one move can save you thousands every year.
What Forms Do I File as a Digital Nomad and When Are They Due?
- Form 1040: Your primary tax return. The standard deadline is April 15, but as a U.S. citizen living abroad, you automatically get a two-month extension to June 15. You can request additional extensions to October 15 if you need more time to meet the 330-day requirement.
- Form 2555: This is how you claim the Foreign Earned Income Exclusion. You’ll list your qualifying period, report where you lived, document your days abroad, and calculate your exclusion. If you’re married, filing jointly, and both spouses work abroad, you’ll each file your own Form 2555.
- Schedule C and Schedule SE: If you’re self-employed, Schedule C reports your business income and expenses (convert everything to USD using IRS exchange rates). Schedule SE calculates your self-employment tax.
- FBAR (FinCEN Form 114): If your foreign bank accounts, investment accounts, or payment processor accounts (like PayPal, Wise, or Revolut) totaled more than $10,000 at any point during the year, you must file this form. It’s filed separately through FinCEN, not with your tax return. The deadline is April 15 with an automatic extension to October 15.
- Form 8938: Required if your foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any point (for single filers living abroad). This one does get filed with your Form 1040.
How Do I Track My Days Abroad as a Digital Nomad?
Begin right away. Set up a simple spreadsheet or use a travel tracking app and record each day you spend inside and outside the U.S. Keep the entries consistent. Spend just a few minutes a day to save yourself a lot of trouble later when you need clear proof of your travel history.
What to track:
- Date and location (city and country)
- Where you’re staying (hotel name, Airbnb address, apartment)
- Entry and exit dates for each country
- Purpose (work, travel, personal)
What to save:
- Passport stamps and visa entries
- Flight tickets and boarding passes
- Train or bus tickets with dates
- Accommodation confirmations and receipts
- Credit card statements showing foreign transactions
- Coworking space memberships or day passes
- Photos with dates and locations
Apps like TripIt or Nomad List make this easier, but even a simple Google Sheet updated weekly works fine. The key is consistency. If the IRS ever questions your Physical Presence Test qualification, you must prove your presence in the United States every single day.
What If I Moved Abroad Halfway Through the Year?
You can still claim a prorated Foreign Earned Income Exclusion based on the number of qualifying days you spent outside the U.S. during the calendar year.
Here’s how it works: Tom moved to Thailand on June 1, 2025, to work remotely. He came back for 10 days at Christmas. By May 31, 2026, he’ll have 350 qualifying days outside the U.S. in those 12 months. For his 2025 tax return, he spent 214 days abroad (June 1 through December 31, minus the Christmas trip).
Tom’s prorated exclusion: $130,000 × (214 ÷ 365) = $76,219
If Tom earned a total of $90,000 in 2025, but only $65,000 was from his time abroad, he could exclude all $65,000 from taxation.
Filing strategy: If you moved abroad late in the year, request an extension using Form 2350. This delays your filing deadline until after you meet the 330-day requirement, letting you claim a larger exclusion instead of filing early with a smaller one.
What If I Haven’t Filed in Years?
Take a breath. You’re not alone, and there’s a way forward. Thousands of digital nomads discover their filing obligations years after starting their location-independent lifestyle.
The Streamlined Filing Compliance Procedures exist specifically for this situation. You’ll file your last three years of tax returns and six years of FBARs, along with a certification that your failure to file wasn’t intentional. If the IRS accepts your submission, you’ll owe zero penalties.
The critical part: you need to come forward before the IRS contacts you. Once they reach out first, this option disappears. If you’re behind, address it now rather than hoping it goes away.
What Should I Do Next as a Digital Nomad? Where Do I Start?
If you’re working remotely from abroad right now, here’s your action plan:
- Start tracking your days immediately: Create a system today and commit to updating it on a weekly basis. This is your insurance policy against tax problems.
- Calculate whether you’ll meet the 330-day requirement for this year or next. Be honest about planned trips home.
- Gather your income records from all sources. If you’re working for multiple clients or companies across different countries, compile all your information and start converting it to USD.
- Review your state tax situation: If you left behind significant ties to a high-tax state, address that now rather than later.
- If you’re behind on filing, don’t wait. The Streamlined Filing Procedures offer a clear path forward, but only if you act proactively.
Most digital nomads who keep good records and file on time usually owe little or nothing in US federal income tax. The Foreign Earned Income Exclusion provides significant tax relief. The bigger risk is skipping the filing altogether, which can lead to penalties later.
Get Help From People Who Live This Lifestyle
At Greenback, we work with digital nomads every single day. We’ve helped over 23,000 expats across 190+ countries stay compliant while living the location-independent dream. Our CPAs and Enrolled Agents live in 14 time zones, many are digital nomads themselves, and they truly understand the challenges you’re facing.
They know how to track days when you’re moving every few weeks. They know how to handle income from multiple countries and currencies. They know how to maximize your Foreign Earned Income Exclusion and minimize your self-employment tax. Most importantly, they know how to give you peace of mind so you can focus on your work and your travels instead of worrying about tax compliance.
No matter how late, messy, or complex your situation may be, we can help. You’ll have peace of mind, knowing that your taxes were done right.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.
Ready to file your US taxes as a digital nomad?
This article provides general information about U.S. tax obligations for digital nomads and should not be considered specific tax advice. Tax laws change frequently, and individual situations vary. Always consult with a qualified tax professional regarding your specific circumstances.
Related Resources
Essential Tax Concepts for Digital Nomads:
- What Is the Physical Presence Test?
- Foreign Earned Income Exclusion: How to Save on Taxes Abroad
- Bona Fide Residence vs. Physical Presence Test
For Self-Employed Digital Nomads:
- Do US Expats Pay Self-Employment Tax?
- How to File Self-Employment Tax as US Expat
- What is Schedule SE? Self-Employment Tax Guide for Expats
Foreign Account Reporting:
If You’re Behind on Filing:
- Streamlined Filing Procedures: How to Catch Up on Taxes
- Delinquent FBAR Filing: How to Catch Up Without Penalties
Planning Your Digital Nomad Journey:
