Do I Need to Pay US Taxes on Earned Income if I am a Digital Nomad?

The most common tax question from digital nomads is, of course, ‘Do I even need to file?’ The easiest answer is that it always makes sense to file, regardless of your situation or earnings. This offers some level of protection as the IRS cannot then penalize you for failing to file. For the remainder of this article, we will dive into the answer in a more detailed manner.

Do I need to file?

If you earned more than the standard deduction amount, regardless of where it was earned, you should file.

Standard deduction amounts in 2024:

• Married Filing Jointly or Qualifying Surviving Spouse: $29,200

• Head of Household: $21,900

• Single or Married Filing Separately: $14,600

Will I be Taxed?

If you are working outside the US, there are a few basic ways that you would be classified to file as a US resident. Basically, you can qualify by fitting either of these ‘substantial presence’ criteria:

1.     You are present in the US

a.     more than 30 days during the year. Since you are filing on a calendar-year basis, this means 30 days during that same calendar year.

and

b.     in the country 183 days in the previous 3 calendar years as a sum of the weighted average basis as follows:

o   Days in current year * 1

o   Days in previous year * .33

o   Days in the year before last * .167

2.     You have a ‘tax home’ that is the US. This means that you are more closely connected to the US than to another nation. Of course, the opposite would also be true; which would make your ‘tax home’ the other nation. Obviously, this rule is less well-defined than rule #1.

However, if one of the criteria above appears to make you a US non-resident for tax purposes, but earn wages over $126,500 per year (2024; indexed for inflation), you might still be subject to be taxed as a resident on a portion of your income.

Note that this is a simplification, and there are numerous nuances to these rules. Also, this is a method of finding out your filing status (US tax resident vs non-US tax resident); not a method of finding out if you can skip filing altogether.

Credit for taxes paid

If a person is working abroad, they may be earning income from a foreign employer. In this case, there are methods of crediting the taxes paid in the foreign country against the tax you would owe in the US. These rules are pretty straight-forward, but are sometimes modified on a country-by-country basis because of tax treaties. In general, the tax paid is credited up to the amount you would pay on that same income in the US.

Simple example 1: You earned $10,000 and paid $500 in tax to a foreign government. This would be able to be credited against your US tax in most all situations.

Simple example 2: You earned $10,000 and paid $3,000 in tax. In this case, let’s assume you would only owe $2,000 tax in the US on this same income. Therefore, only $2,000 is able to be credited.

Doing Business as a Digital Nomad

If you are a digital nomad, the situation becomes more complex. There will be questions about where the earnings took place. In order to work abroad, you likely are operating your own business, in some way. If you have not done so already, it makes sense to think about setting that business up officially. Creating the proper business entity and tracking your revenues and expenses gives you a record of your earnings. Filing the return shows the amount, time, and place that you are declaring that these earnings belong. In a future blog we will discuss the details of setting up your business as a digital nomad, and the tax implications.

Investment Income

If you have investment income from US sources, you also will likely need to file a tax return. However, I include the word ‘likely’ here because this is somewhat complex. This hinges on how the party that is holding your funds as an investment has your residence classified. It is best to discuss this issue with a CPA, as it could have some serious tax consequences. Look for a future blog about the taxation of investment income for US citizens living abroad.

Other Reporting Requirements

Look for an upcoming blog where we discuss additional reporting requirements for US citizens living overseas.

Summary

In summary, taxes are something that digital nomads should not ignore. Working and living abroad does have consequences for your tax situation. This is one of the most complex areas of tax law, and is made even more complex by tax treaties between nations that often change how things are handled in certain countries. No matter how long you have lived abroad, or if you are trying to plan ahead for your move, it is worth doing some research as to how to stay tax compliant.

This is the first of several blogs about business and tax issues faced by digital nomads and other expats. To get notifications of future blogs, please follow us on LinkedIn.

The advice given here is only general in nature. We suggest contacting a CPA to discuss your specific situation.

No part of this article was written by artificial intelligence (AI). AI is only capable of summarizing. It does not know if the sources it is drawing from are correct, and it does not understand how law and accounting rules operate. Please do not rely on AI to answer legal or financial reporting questions.

Information valid as of the date of posting; December 16, 2025.