Living a life of freedom, travel, and remote work can be incredibly fulfilling—but it doesn’t exempt you from paying taxes. If you’re a digital nomad, taxes can get a bit complicated, especially if you’re moving between countries frequently.
In this guide, we’ll break down the basics of how digital nomads should approach their tax responsibilities, what to watch out for, and how to stay legal no matter where you are in the world.
1. Understand That You Still Owe Taxes
Even if you’re traveling full-time, you likely still owe taxes to your home country—especially if you’re a citizen of countries like the United States, which tax based on citizenship rather than residence.
Common scenarios:
- U.S. citizens must file taxes yearly, even if living abroad.
- EU citizens may need to file taxes depending on how long they stay outside their home country.
- Residents of countries with territorial tax systems may not owe taxes on foreign income.
Tip: Always check the rules for your country of citizenship.
2. Know Where You Are a Tax Resident
Tax residency is usually determined by how long you stay in a country, your ties to that place, and where your income is sourced.
Most countries consider you a tax resident if you:
- Stay longer than 183 days in a calendar year
- Have a permanent home there
- Have economic ties, such as a business or bank account
If you become a tax resident, you may be required to pay local income tax.
3. Use Tax Treaties to Avoid Double Taxation
Many countries have double taxation agreements to prevent you from being taxed twice on the same income.
These treaties typically allow:
- A tax credit for foreign income taxes paid
- Exemptions for certain types of income
- Coordination between tax authorities
Look up treaties between your home country and the countries where you spend the most time.
4. Understand the Foreign Earned Income Exclusion (U.S. Citizens)
U.S. citizens living abroad may qualify for the Foreign Earned Income Exclusion (FEIE), which allows you to exclude up to $120,000+ (amount varies yearly) of foreign income from U.S. taxes.
To qualify, you must meet one of these:
- Physical Presence Test: Spend 330 full days outside the U.S. in a 12-month period
- Bona Fide Residence Test: Prove that you have established residency in another country
You may also claim the Foreign Housing Exclusion for rent and housing expenses.