When you've decided where you're going to live, you will need to think about the tax implications of such a move. Even if you live abroad as a U.S. citizen, the IRS will still need information about your earnings. There are no differences in the filing and payment of income taxes if you live within or outside the United States.

Filing taxes in one country is complicated for anyone, and for digital nomads, it gets even more complicated.

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Do digital nomads have to pay taxes?

Yes. No matter where you live in the world, if you are a U.S. citizen or a Green Card holder, you have to file U.S. tax returns declaring your worldwide income.

In other words, digital nomads must file a U.S. tax return if they earn over the minimum amount required to file.

American citizens are taxed based on their citizenship, not where they live. Therefore, if you are considered a U.S. citizen and earn over the minimum amount of worldwide income, you have a tax obligation regardless of where you live. Even if you earn no income in the U.S., you are still eligible.

Digital nomads may be taxed on wages, interest, dividends, rental income, and more from foreign sources.

When you are employed by a foreign employer, you are not required to pay self-employment taxes (Social Security and Medicare). An employer in the U.S. will automatically deduct this from your salary.

There are however many digital nomads who are self-employed and may be liable for SECA (Self-Employed Contributions Act) tax. Be careful when choosing a destination country - some have signed a 'Totalization Agreement'. If you live in a country that has signed this agreement, you are exempt from SECA taxes and instead pay Social Security taxes in the country where you reside.

Where do digital nomads pay taxes?

As a U.S. citizen or Green Card holder, no matter where you live, you must file U.S. tax returns.

You are, however, considered a tax resident in the country where you spend more than 183 days in a calendar year. Though, you will not automatically be a tax resident of a country if you simply reside there for a longer period than the above-mentioned period. 

In practice, this means that your country of citizenship must be notified in writing that you no longer qualify for tax residency in order to stop considering you a tax resident, along with the date and details of the employee who accepted it. 

In order for your new tax residence to become valid, you must notify your country of residence of the change of residence. You can do this by registering with the tax office of your new permanent residence and obtaining an individual tax number. This number will be required for a variety of purposes. An example would be opening a bank account in the country where you have moved. 

If you plan to transact business in various countries, you must become a tax resident somewhere. For certain occupations, this is the best choice. You should earn your international income in a country with no income tax outside its borders if you do not want to pay taxes on it.

info icon Helpful resource: US citizens living abroad, do you have to pay taxes?

Do digital nomads need to pay state taxes?

Yes. Even if you're a digital nomad, you may still have to file state taxes - it depends on what state you lived in before you moved abroad.

To ensure you remain compliant, it is recommended that you consult an expat tax professional if you are uncertain whether you have a U.S. state tax obligation.

Do digital nomads need to pay taxes in other countries?

Depending on how much time and money you spent in another country, you may have to pay taxes there.

There is also no one-size-fits-all approach. In the UK and Europe, for example, American digital nomads will have different tax obligations than those in South America or Russia. If you plan to do business in another country, find out their income tax laws and residency laws so that you know what taxes you will need to pay.

Double Taxation Agreements

Taxes paid to your host country will be deducted from your U.S. tax liability. Therefore, there will be no double taxation. You may have local tax obligations based on how much time you spend in each country you visit.

It is possible for you to be a tax resident in two countries at the same time, and both countries may expect you to pay taxes on your income. Most countries have put in place double taxation agreements to avoid this. In these documents, a country specifies the rules with which you will be considered as its resident and how its income will be taxed.

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Foreign Tax Credit

When you earn foreign earnings, you pay taxes in both your home country and the foreign country in which you work. In exchange for this, the IRS offers you the foreign tax credit. Foreign tax credits allow you to avoid paying taxes in both the U.S. and the foreign country.

If you paid or accrued any qualified foreign taxes during the year, you can claim them as a foreign tax credit or as an itemized deduction. Tax credits for qualified foreign taxes are generally preferable to itemized deductions because of the following reasons:

  • Credits reduce your U.S. federal income tax on a dollar-for-dollar basis, while deductions reduce just the income subject to tax.
  • If you do not itemize your deductions, you can still take the foreign tax credit. The standard deduction is also available.
  • You may be able to carry over or carry back any excess foreign taxes paid or accrued over the credit limit for a given tax year if you choose to take the foreign tax credit.

The Foreign Earned Income Exclusion

When working abroad, you should be aware of the foreign earned income exclusion. You can exclude up to $107,600 of foreign earned income that comes from your personal services if you have qualifying income. This applies to both employees and self-employed individuals.

This exclusion is available if you are a resident of a foreign country for the entire tax year or are physically present in a foreign country for at least 330 days in the tax year for which you wish to claim this exclusion.

To qualify for the Foreign Earned Income Exclusion, the taxpayer must meet either of the following two criteria:

  • 330 days in any 365-day period must be spent living and working outside of the U.S., known as the Physical Presence Test (PPT).
  • An entire calendar year of living and working abroad - called the Bona Fide Residence Test (BF)

The two criteria may appear to be similar, but they are quite different when it comes to how they affect your US taxes.

How to Report Your Foreign Earnings

All income earned while living and working abroad must be reported. The IRS wants to know what you earned in US Dollars (USD) whether it was earned in the U.S. or abroad. 

If you have an employer in the US or abroad, you will not be liable for self-employment taxes (Social Security and Medicare); your employer takes care of this for you.

If you are self-employed, you will still be required to pay quarterly estimated taxes as if you lived in the United States.

Tax Deductions for Digital Nomads

You can deduct any expense you incur in order to earn your living. Digital nomads tend to incur expenses such as:

  • Laptops, computer accessories, as well as computer-related equipment
  • Office expenses, such as notebooks, pens, and other supplies
  • A service that provides Internet access
  • Expenses related to your mobile phone, SIM cards, and service
  • Coworking memberships
  • Fees incurred by PayPal and other banking channels when getting paid
  • Accounting and legal expenses
  • Professional licenses or insurance you need to operate in your profession
  • Subscriptions and memberships, including association fees
  • Expenses for courses or education related to your field

You can deduct even more expenses if you have a blog or website as part of your digital nomad career. For example:

  • Domain registration and website hosting fees
  • Expenses associated with newsletters and other marketing programs
  • Spending on advertising, including boosting posts on Facebook
  • A blogging course or any other educational expense incurred to improve your business performance
  • Payments you make to affiliates who promote your products
  • Virtual assistants or employees

If you're a travel blogger, then you're in luck - most travel expenses can be deducted from your taxes too!

When to File Taxes as a Digital Nomad

Those residing outside the United States on April 15 get an automatic extension for filing taxes, until June 15.

You get an automatic two-month extension to file your return and pay your taxes without having to request it. Instead of April 15th, the tax deadline would be June 15. In case you owe any penalties, these are calculated based on the extended date in June.

These tax deadlines fall on the 15th of the month, except on weekends, when the deadline falls the following business day. 

If you need more time, you can apply for an extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by June 15th.


In addition to regular tax requirements, digital nomads may also be required to file FBARs (Foreign Bank Account Reports). The aggregate of non-US financial accounts (checking, savings, brokerage, pension, etc) must be reported by June 30. 

What happens if you don't file your US tax return?

When you try to evade your U.S. tax obligations, there are steep consequences - and it is very easy to get caught. Due to FATCA, many financial institutions around the world share financial account information with the United States government.

You can face penalties of up to $10,000 for not paying your expat tax, and you can even lose your passport if you are seriously out of compliance.

Filing US Taxes From Abroad

Digital nomads tend not to be in their country of residence during tax season. 

Finding an accountant or tax preparer in your home country is highly recommended. The best time to do this is before you begin your life as a digital nomad, but just in case you forgot to do it, do not worry. As digital nomads and expats become an increasingly important demographic, more tax professionals are becoming experts in digital nomads and expat tax planning.

Make sure you don't leave yourself open to penalties for filing incorrectly. Tax preparers who specialize in digital nomad and expat tax situations will save you a lot of money (and aggravation) in the long run.

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