Your tax plan
travels with you.

US citizens and permanent residents must file a federal income tax return with the IRS regardless of where in the world they live or earn their income. This worldwide taxation requirement means that whether you are working from a cafe in Lisbon or a coworking space in Bali, you are legally obligated to report all income to the US government. The most significant tax benefit available to qualifying digital nomads is the Foreign Earned Income Exclusion (FEIE), which for 2026 allows you to exclude up to $132,900 of foreign earned income from US taxation.

To qualify for the FEIE, you must pass either the Bona Fide Residence Test (establishing genuine residency in a foreign country for a full tax year) or the Physical Presence Test, which requires that you be physically present in a foreign country or countries for at least 330 full days during any 12-month period. Even with the FEIE, self-employment tax of 15.3% — comprising 12.4% for Social Security and 2.9% for Medicare — still applies to your net self-employment income. The FEIE excludes income from income tax, not from self-employment tax.

Totalization agreements between the US and certain treaty countries can help you avoid paying social security taxes to two countries simultaneously. If you are working in a country that has a totalization agreement with the US, you may only need to pay into one country's social security system. State tax obligations are another consideration that catches many digital nomads off guard. Some states, particularly California, New York, and Virginia, have aggressive residency rules and may continue to claim you as a tax resident even after you leave, especially if you maintain connections such as a mailing address, bank account, or driver's license in that state.

Portugal has become one of the most popular destinations for digital nomads, thanks in part to its Non-Habitual Resident (NHR) tax regime and dedicated digital nomad visa. Under the NHR program, qualifying new residents can benefit from a flat 20% tax rate on certain Portuguese-source income and potential exemptions on foreign-source income for up to ten years. Portugal has a tax treaty with the US, and the FEIE is generally the recommended approach for nomads earning under the exclusion threshold. UAE and Dubai impose zero personal income tax, making them attractive for digital nomads seeking to minimize their tax burden. However, there is no US-UAE tax treaty, which means the Foreign Tax Credit is not available — the FEIE is the only tool for reducing US tax on earned income.

Thailand has no tax treaty with the US and applies territorial taxation for non-residents, meaning income earned from foreign sources is generally not taxed locally as long as it is not remitted into Thailand within the same tax year. The FEIE works well here for most digital nomads. Mexico offers a digital nomad visa, but you need to carefully monitor how long you stay — Mexico can assert tax residency if you establish a permanent home or your center of vital interests shifts there. Mexico has a tax treaty with the US, and both FEIE and FTC strategies may apply depending on your situation.

Canada has high personal income tax rates (combined federal and provincial rates can exceed 50% at the top bracket), but the robust US-Canada Tax Treaty and the FTC mechanism mean that taxes paid to Canada generally eliminate any additional US tax liability on the same income. The FTC is almost always the better choice for nomads based in Canada. Georgia is increasingly popular among freelancers due to its micro-business tax regime, which offers a 1% flat tax rate on gross revenue for qualifying small businesses earning under approximately $155,000 annually. Georgia has no tax treaty with the US, so the FEIE is the primary tool for reducing US tax, while the small amount of Georgian tax paid can be credited via the FTC on a separate income category. We evaluate each client's country-specific situation to recommend the optimal combination of FEIE and FTC strategies.