How to Improve the Way You Handle Your Taxes
Living as a digital nomad offers great freedom and flexibility, but it also creates specific tax challenges for U.S. citizens.
Even if you’re living and working remotely across different countries, the United States requires you to report your global income.
This guide shares practical tips to help you manage your tax responsibilities effectively in 2025.
Knowing Your Tax Responsibilities
No matter where you are in the world, if you’re a U.S. citizen or a green card holder, you need to report all your income to the IRS.
This includes wages, freelance payments, and business earnings. Even if you’re paying taxes abroad, filing a U.S. tax return is still mandatory.
Planning ahead is crucial to avoid any serious issues with the IRS.
Avoiding Being Taxed Twice
To prevent double taxation on the same income, consider these options:
- Foreign Earned Income Exclusion (FEIE): Lets you exclude up to roughly $120,000 of income earned abroad from U.S. taxes.
- Foreign Tax Credit (FTC): If you’ve paid taxes in another country, you can claim a credit to lower your U.S. tax bill.
- Foreign Housing Exclusion/Deduction: Certain housing expenses while living outside the U.S. can be excluded or deducted.
State Tax Issues
Some states, like California and New York, may continue to tax you even after you move overseas.
To avoid this, it’s smart to establish residency in states without income tax, such as Florida or Texas, before starting your digital nomad life.
Tax Deductions for Digital Nomads
Make sure to take advantage of deductions to reduce your taxable income:
- Home Office Costs: Expenses related to a dedicated workspace can be deductible.
- Travel Expenses: Business-related travel may qualify for deductions.
- Equipment and Supplies: Necessary work tools like laptops and software can also be deducted.
Keep thorough records and receipts of all your expenses to make tax filing easier.
Reporting Foreign Bank Accounts
If you have foreign bank accounts with balances over $10,000, you’re required to file the Foreign Bank Account Report (FBAR).
You might also need to submit Form 8938 for foreign financial assets.
Tax Residency Planning
Many countries consider you a tax resident if you spend more than 183 days there.
Since this can apply to digital nomads, plan your travels carefully to avoid unwanted tax residency in high-tax countries.
Seek Professional Help
International tax laws can be complex, so consulting an expat tax professional or an international accountant is highly recommended.
They can help you stay compliant and optimize your tax situation.
Smart Tax Tips for Foreign Digital Nomads in the U.S. (2025)
Not only Americans go abroad—many international digital nomads choose the U.S. for its infrastructure, entrepreneurial spirit, and career opportunities.
However, living and working remotely in the U.S. requires careful attention to immigration laws and tax rules.
Legal Work Requirements
Most digital nomads enter the U.S. on a B-2 tourist visa or via the Visa Waiver Program.
These visas do not allow you to work, even remotely, for U.S. clients or companies. Working on such visas can cause legal problems or lead to deportation.
To work legally, consider applying for visas like:
- O-1 (individuals with extraordinary ability)
- E-2 (investor visa)
- L-1 (intra-company transfer)
Do You Need to File U.S. Taxes?
If you spend more than 183 days in the U.S. during a tax year, you may be classified as a tax resident and must report your worldwide income to the IRS.
If your home country has a tax treaty with the U.S., it might help reduce or avoid double taxation, provided you properly file Form 8833.
Another practical option is to establish an LLC in business-friendly states like Delaware or Wyoming, enabling you to invoice U.S. clients legally and use payment platforms like Stripe or PayPal smoothly.
To ensure you follow the rules and optimize your tax strategy, it’s best to consult a tax expert knowledgeable in international and cross-border regulations and stay updated on IRS policies.
