Tax Considerations for US Digital Nomads Living Abroad

If you are an American working remotely while traveling the world, you may identify as a digital nomad. But even without a fixed address, you still have tax obligations to the United States. This post outlines the most important tax considerations for US citizens living abroad full time or long term.

Do Digital Nomads Still Have to File U S Taxes?

Yes. The United States is one of the few countries that taxes based on citizenship rather than residency. That means even if you have not lived in the US for years, you still have to file a federal tax return each year and report your worldwide income.

What Is the Foreign Earned Income Exclusion?

Digital nomads can benefit from the Foreign Earned Income Exclusion or FEIE. This allows you to exclude up to one hundred twelve thousand dollars (amount may adjust yearly) of foreign earned income from U S taxes if you qualify under:

• The physical presence test

• The bona fide residence test

To claim the exclusion, you must file Form 2555 with your tax return.

Do You Need to File an FBAR?

Yes, if you have foreign bank accounts and the combined value exceeds ten thousand U S dollars, you must file an FBAR (FinCEN Form 114). This is a separate requirement from your tax return and is submitted through FinCEN’s online system.

Self Employment and Digital Nomads

If you are self employed, you may still be subject to self employment tax even if your income is excluded from regular income tax. This includes Social Security and Medicare contributions.

If you live in a country with a Social Security agreement with the United States, you may be able to avoid US self employment tax with proper documentation.

State Tax Considerations

Even if you move abroad, some US states may consider you a tax resident if you maintain ties such as:

• A driver’s license

• A home

• Voter registration

California, New Mexico, and Virginia are especially strict. You may need to formally break residency to avoid state tax.

Final Thoughts

As a digital nomad, managing taxes can be more complex — but it is manageable with good advice. Filing late or incorrectly can lead to penalties, especially if you miss FBAR or FATCA filings.

At Nordfiscus, we help American nomads stay fully compliant while making the most of tax exclusions and credits. Contact us today for help navigating your nomadic tax life.