Taxes as a Nomad: What You Need to Know
Taxes are one of the most dreaded and confusing topics for digital nomads. The U.S. government doesn’t care where you live or work—if you’re a U.S. citizen, you’re taxed on your worldwide income.
If you’re a digital nomad, expat, immigrant, or something in between—you need to know how to stay compliant while making the most of available tax advantages.
Fair warning: Let’s get the boring bit out of the way, and in the end, I’ll explain it again as if we are in fifth grade!
Disclaimer: I’m not a tax professional—this is just a brief overview of what I’ve learned from my own experience as a nomad. Tax laws vary by country and change often, so always consult a qualified tax advisor for advice specific to your situation. For official guidance, refer to the links provided below.
Table of Contents
Do Nomads Have to Pay U.S. Taxes?
Yes, U.S. citizens and permanent residents must report and potentially pay taxes on worldwide income, regardless of where they live.
If you earn more than the standard deduction ($13,850 for single filers in 2023), you’re required to file a federal income tax return. (Yay…)
What About State Taxes?
State taxes can also apply, depending on your ties to your home state. Maintaining a driver’s license, voter registration, or property can trigger state tax obligations.
If you want to avoid state taxes, consider cutting ties and moving your residency to a tax-free state like Florida, Texas, or Nevada.
Learn more about state tax residency from the IRS.
My personal note: I’m originally from Florida and have been a resident for most of my life. When I met Garrett, an Oregonian, I switched to Oregon residency for a bit.
However, I’ve since switched back to Florida to avoid state taxes, and we’ve also moved our business there for financial reasons. It just makes more sense!
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion (FEIE) allows U.S. citizens living abroad to exclude up to $120,000 of foreign-earned income (as of 2023) from U.S. taxes, if you qualify.
This is one of the most popular tax advantages for nomads.
How to Qualify for the FEIE
There are two ways to qualify:
- Physical Presence Test: You must spend 330 full days outside the U.S. within a rolling 12-month period.
- Bona Fide Residence Test: You must establish residency in another country for a full tax year and prove intent to stay indefinitely (e.g., obtaining a lease or utility bill).
For more details on the FEIE and how to file, check out the IRS Foreign Earned Income Exclusion page.
I have done this a few times, and I currently am now. I’m in Thailand and will only spend about two weeks in the US in 2024. Next year, I know I’ll be in the USA more, so I won’t qualify for the FEIE in 2025.
Foreign Tax Credits (FTC)
If you pay taxes to another country, the Foreign Tax Credit (FTC) can help you avoid double taxation by offering a dollar-for-dollar reduction on your U.S. taxes.
This is particularly helpful if you work for a local employer or pay taxes as a resident of another country.
The FEIE and FTC can be used together in some cases, but not on the same income. Learn more about the FTC on the IRS website.
Paying Taxes in Host Countries
The 183-Day Rule
Most countries require you to pay taxes if you spend 183 days or more in a year within their borders. This doesn’t always mean filing taxes as a resident, but it’s important to check local rules to avoid penalties.
Working for a Local Employer
If a company employs you in your host country, taxes are typically withheld from your paycheck. In this case, you must research whether your host country has a tax treaty with the U.S. to avoid double taxation.
Nomad-Friendly Tax Schemes
Some countries offer tax incentives for digital nomads and expats:
- Portugal’s Non-Habitual Residency (NHR): Offers reduced tax rates or exemptions for up to 10 years. Learn more.
- Georgia’s Tax-Free Nomad Visa: Income earned abroad is not taxed while you live in Georgia. Learn more.
- Estonia’s e-Residency Program: While not a tax-free solution, it offers streamlined business management for remote workers. Learn more.
You can also look into other countries; these are just a few examples. Always check the tax rules of your host country on official government sites.
Social Security and Medicare Taxes
Even if you qualify for the FEIE or FTC, self-employed nomads are still responsible for Social Security and Medicare taxes on their income.
However, the U.S. has totalization agreements with some countries, allowing you to avoid double contributions to Social Security systems. Find out if your host country has a totalization agreement.
Staying Organized and Filing
Track Your Income and Travel Days
Tracking your income, expenses, and travel days is crucial for staying compliant with tax laws and maximizing deductions.
For example, qualifying for the Foreign Earned Income Exclusion (FEIE) requires proof of your physical presence abroad (330 days outside the U.S.).
Accurate records also protect you from double taxation and ensure you can claim business expense deductions if you’re self-employed. A simple spreadsheet is fine!
Use Tax Software or Hire a Professional
Filing taxes as a nomad can be a b*. Use tax software like TurboTax or consult a tax professional familiar with international clients.
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For official guidance, refer to IRS Publication 54, the Tax Guide for U.S. Citizens and Resident Aliens Abroad.
I used to file myself when I wasn’t making much in my first few years of travel. But now I own an LLC, and I’ll pay anything not to deal with it, so I use a specialist. It’s not cheap, but I will also avoid jail, so that’s a bonus!
Confused? OK, Let’s Simplify This!
Taxes as a nomad can feel overwhelming, so let’s break it down into the most common scenarios for U.S. citizens.
Scenario 1: Remote Workers (Digital Nomads)
If you’re working remotely for U.S.-based clients or running your own business as a freelancer:
- You’re responsible for filing and paying U.S. taxes on your worldwide income.
- The Foreign Earned Income Exclusion (FEIE) may allow you to exclude up to ~$120,000 of income if you qualify by spending most of the year outside the U.S. (330 days or more) or establishing residency in another country.
- You’ll still owe self-employment taxes (Social Security and Medicare) even if the FEIE applies.
You’re not likely paying taxes in your host country unless you spend more than 183 days there or establish formal residency, but always check the local laws.
RELATED: 26 Digital Nomad Jobs: Best Remote Jobs for Travelers!
Scenario 2: U.S. Company Employs You, But You Live and Work in Another Country
If you’re employed by a U.S. company but physically living and working abroad:
- Your employer might withhold U.S. taxes from your paycheck.
- You’ll need to file a U.S. tax return, but you may qualify for the FEIE to exclude some of your income if you meet the requirements.
- Depending on your host country’s rules, you may owe taxes locally, especially if you’re living there full-time. Some countries require you to register for tax residency and pay income taxes even if your employer is abroad.
- If you pay local taxes, you can typically use the Foreign Tax Credit (FTC) to reduce your U.S. tax liability.
Scenario 3: Employed by a Local Company Abroad
If you’re working for a local company (e.g., teaching English or being hired by a foreign employer):
- Research whether your host country has a tax treaty with the U.S. to streamline this process.
- You’ll almost certainly pay taxes in the host country, as your employer is local and required to withhold taxes.
- You’ll also need to file a U.S. tax return because the U.S. taxes its citizens on worldwide income.
- Use the Foreign Tax Credit (FTC) to get credit for the taxes you paid abroad and avoid being taxed twice.
Of course, this isn’t 100% tailored to your situation, but it’s a good starting point to understand the basics.
Everyone’s tax setup is unique, so if you’re unsure, it’s always smart to consult a tax professional who knows the ins and outs of nomad taxes!
I hope this helped you figure out some stuff regarding taxes as a nomad; good luck fine-tuning everything to your situation—I know it’s not fun!
