A practical guide to filing U.S. taxes abroad, understanding the foreign earned income exclusion, avoiding state tax traps, and staying compliant while living the laptop lifestyle.
You’ve swapped your office desk for a laptop lifestyle. You’re working from Lisbon one month, Bali the next. Your Instagram feed looks incredible.
But then tax season hits, and reality sets in.
Here's the thing: Even when you’re sipping coffee in a Chiang Mai café while working, the IRS still expects to hear from you. The good news? Most digital nomads end up owing little to nothing in federal income tax when they file correctly.
This guide covers the tax basics every digital nomad needs to understand.
Do you still need to file U.S. taxes?
If you're a U.S. citizen or green card holder, you file taxes no matter where you live. Your tax bill follows your passport, not your location.
The filing requirements are straightforward:
Single filers earning over $13,850 must file for the 2025 tax year
Self-employed? You need to file if you made more than $400
This applies whether your clients are in New York, your income comes from a Berlin startup, or you’re running an affiliate marketing site from your laptop.
But here’s what matters most: Filing doesn’t automatically mean paying. That's where things get interesting.
Where do you actually pay taxes?
The question “Where do I pay taxes if I work remotely?” comes up constantly. The answer depends on three things.
Your citizenship matters first. As a U.S. citizen, you always file with the IRS. Always.
Your location matters second. Most countries only tax you if you become a tax resident, which usually kicks in after 183 days. Keep moving and never spend more than six months in one place? You probably won’t owe taxes to any foreign country.
Your state ties matter third. California, New York, Virginia and a few other states are notorious for chasing you even after you leave. They’ll keep taxing you if you maintain connections like property, a driver’s license or bank accounts there.
How does the foreign earned income exclusion save you money?
The foreign earned income exclusion, or FEIE, is your best friend as a digital nomad. For 2025 taxes filed in 2026, you can exclude up to $130,000 of foreign income from U.S. taxes. Married couples where both work abroad? That’s potentially $260,000 excluded.
But you need to qualify first. And understanding how to file correctly makes all the difference. Check out this guide on filing expat taxes to make sure you're doing it right.
What’s the 330-day rule?
To claim the FEIE, you need to pass something called the physical presence test. Here’s what that means:
You must be outside the United States for at least 330 full days in any 12-month period
Those 12 months don’t need to match the calendar year
You can move between different countries freely
You don’t need a permanent home anywhere
You can bounce from Thailand to Portugal to Mexico and still qualify
The tricky part? A “full day” means the entire 24 hours. If your flight lands in Miami at 11:55 p.m., that whole day doesn’t count. You can travel through international airspace between countries, but time over U.S. airspace doesn’t count toward your 330 days.
Keep detailed records. The IRS will ask you to prove every single day if they audit you.
What income actually qualifies?
The FEIE only covers earned income — money you make from actually working:
Salary or wages from any employer
Freelance and consulting income
Your online business profits
Bonuses and commissions
What doesn’t qualify:
Investment returns, dividends or interest
Rental income from properties
Retirement account withdrawals
Any work you did while physically in the US
What’s self-employment tax?
This surprises a lot of digital nomads. The FEIE eliminates your income tax — but if you’re self-employed, you still owe self-employment tax.
Self-employment tax covers Social Security and Medicare — that’s 15.3% of your net business income. For 2025, you pay 12.4% on the first $176,100 for Social Security, plus 2.9% for Medicare on everything you earn.
Location doesn’t matter. Work from Bali, work from Barcelona — you still owe this tax.
An example: Sarah earned $85,000 freelancing from Europe in 2025. Thanks to the FEIE, she pays $0 in federal income tax. But she still owes roughly $12,000 in self-employment tax.
There’s an escape route: totalization agreements. Countries like Germany, France, Spain and Canada have deals with the United States. If you’re paying into their social security systems, you might avoid U.S. self-employment tax. But popular spots like Thailand, Mexico, Portugal and Costa Rica don’t have these agreements.
What about digital nomad visas and tax traps?
More countries are rolling out digital nomad visas. But each one handles taxes differently.
Digital Nomad Visas and Tax Situations
| Country | Visa type | Tax situation |
|---|---|---|
| Portugal | D8 Digital Nomad Visa | Usually no Portuguese tax on foreign income |
| Estonia | Digital Nomad Visa | Typically no Estonian tax on foreign income |
| Spain | Digital Nomad Visa | Special tax rate available, but 183+ days = tax resident |
| Croatia | Digital Nomad Visa | One year exemption on foreign income |
| Thailand | LTR Visa | 180+ days can trigger tax residency on global income |
| Mexico | No specific visa | 183+ days or economic ties = tax resident |
Do your homework before you apply for any visa. The tax bills can be thousands more than you expect.
Tax Tips for Digital Nomads
Track every day you’re abroad.
The IRS doesn’t take your word for it. If they question whether you qualify for the FEIE, you need proof of where you were every single day.
Start a spreadsheet today. Track:
Date, city and country
Where you stayed (hotel name, Airbnb address)
Entry and exit stamps in your passport
Flight tickets and boarding passes
Hotel and Airbnb confirmations
Credit card statements showing foreign purchases
Coworking space memberships
Photos with timestamps and location data
Trying to piece this together a year later is a nightmare. Track as you go.
Know which tax forms you’ll need.
Digital nomads typically file these forms:
Form 1040: Your main tax return
Form 2555: Claims the foreign earned income exclusion
Schedule C: Reports self-employment income
Schedule SE: Calculates self-employment tax
Form 1116: Claims foreign tax credit if you paid foreign taxes
FBAR (FinCEN Form 114): Required if foreign accounts hit $10,000 at any point
Form 8938: Required if foreign assets exceed $200,000 (single) or $400,000 (married)
Mark the key deadlines for 2025 taxes:
June 15, 2026: Automatic filing deadline for Americans abroad
October 15, 2026: Extended deadline if you request it
April 15, 2026: Payment deadline (even with filing extensions, interest starts here)
How to Break Ties With Your Home State
Some states won’t let you go easily. Before you leave the United States, cut your ties cleanly:
Cancel your state driver's license and get one in a tax-friendly state.
Close bank accounts registered in your old state.
Change your voter registration.
Stop using family addresses for mail or documentation.
Sell or rent out the property you own there.
Smart move: Establish residency in one of the seven states with no income tax first. That's Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming. This one step can save you thousands every year.
Document everything you do to prove you’ve left. States like California will fight to keep taxing you.
If You Haven’t Filed in Years
Discovered you should’ve been filing but didn’t? Don’t panic.
The IRS has a program called streamlined filing compliance procedures designed for exactly this situation. You’ll need to:
File your last three years of tax returns
File six years of FBARs (if you had foreign accounts over $10,000)
Submit Form 14653 saying you didn’t skip filing on purpose
If accepted, they typically waive all penalties. The catch: You must come forward before the IRS contacts you. Once they reach out first, this option disappears.
Working From Different U.S. States
Traveling around the U.S. instead of abroad? Different headache.
Some states tax you for every day you work there. Others have agreements with neighboring states. You might end up owing taxes to multiple states if you’re not careful.
Track which state you’re working from each day. If you’re earning a high income while traveling domestically, your employer might need to withhold taxes for multiple states. Talk to your payroll department before you start moving around.
What Changed for 2026
FEIE limit: $130,000 for 2025 (filed now), increasing to $132,900 for 2026 (filed in 2027)
Self-employment Social Security cap: $176,100 for 2025
Thailand’s new rules: Global income taxation now affects tax residents
More countries are launching digital nomad visas with varying tax rules
When to Get Professional Help
Most digital nomads who track their days carefully and file on time end up owing little in federal income tax. The FEIE handles most of it if you’re earning under $130,000.
The real danger? Not filing at all. You can get hit with penalties even when you don’t owe any tax.
When you’re dealing with income from different countries, multiple currencies and various client types, a CPA who specializes in expat taxes is worth every penny. They’ll help you claim every exclusion you’re entitled to while keeping you compliant.
Your laptop lifestyle shouldn’t be complicated by taxes. Get the basics right, keep good records, and you can focus on your work and travels instead of worrying about the IRS. –Ivana Babic
