The FEIE for Digital Nomads – Travel the World and Pay No Taxes

‘Nothing is certain except death and taxes’ – Benjamin Franklin, 1789

American taxes are like a ghost, haunting you no matter what country you escape to. Even moving to a tax haven won’t save you from them. But what if there was an escape? What if you could pay no (income) tax on (some of) your hard earned, US sourced paycheck? The Foreign Earned Income Exclusion isn’t just for expats trying to escape double taxation. It can be used by world travelers, digital nomads, and other itinerant types to avoid paying US income tax, even if you’re not paying income tax to another country.

Picture this: you file your taxes in April and get a $20,000 refund check from the IRS. No loopholes, no grey areas, just a fat check for living outside of the US for at least 11 months of the year. And that year doesn’t even have to align with the calendar year either.

In 2024 we did just that. Before we settled in France, my wife and I traveled all over Europe. We spent over a year in ten different countries, never staying long enough in any single country to establish tax residency. When we filed our taxes in early 2025, we got a healthy five-figure refund from the IRS; every last cent of income tax paid all year, returned to us (without interest, of course). Here’s how it works.

Disclaimer: I’m not a tax professional, accountant, or really any kind of professional at all. This article is for informational purposes only and shouldn’t be relied on for tax, legal, or accounting advice.

The Foreign Earned Income Exclusion

What is the FEIE?

The FEIE primarily allows American expats living abroad a way to avoid double taxation. It allows earned income from salaries and paychecks to be excluded from taxation. The excluded wording is important; it’s not a credit or deduction. Income excluded on your taxes still impacts your overall gross income, so it will still push any income/capital gains/etc not excluded into a higher bracket. Essentially, you’ll be calculating your taxes as if the exclusion wasn’t there, then getting only the taxes you would have payed for the excluded income back as a refund. So if you exclude $100k of income and also have $25k of capital gains, you’ll still pay the 15% capital gains rate because your income is considered to be $125k.

In 2025, the IRS allows a maximum FEIE exclusion of $130k for single filers and $260k for married couples. That means single filers can save over $20k and married filers over $40k on their federal taxes.

How do I qualify for the FEIE?

There are two ways to qualify for the FEIE: bona fide residence test and physical presence test. The bona fide residence test is primarily for expats who have moved abroad and now have a tax home and obligations to another country. The physical presence test is what most digital nomads will use, requiring 330 days spent outside of the US.

There are a lot of details in how the 330 days gets calculated. But in broad strokes: if you spend less than a month in the US and don’t maintain a home/family/abode back in the US, you should qualify. You’ll also likely file as an itinerant if you haven’t settled in any one country. Keep track of the dates spent in each country, as the IRS wants to know the tedious details of each one.

The 330-day rule also has some great flexibility: it’s not locked to a calendar year. You can delay filing taxes until meeting the threshold, if you left the US mid-year. There are some great calculators online for tracking specific dates and totals throughout the year.

Does it really work?

When I heard about the FEIE, I was already traveling abroad and working remotely as a digital nomad. At first I thought it was too good to be true; there was no way it could work for someone not already paying taxes to another country. But I diligently tracked days, did a lot of research, and kept my fingers crossed. And voilà, with 334 days outside of the USA for the 2024 tax year we got a refund for over $10k!

Our jobs were regular, remote US jobs with US-sourced W-2 income. We played it safe and kept our deductions the same as when we were in the US; if the FEIE didn’t work we didn’t want to pay a penalty and owe back-taxes. I’d recommend this approach for anyone doing this for the first time. A quick trip for a wedding, an unexpected funeral, or just deciding nomading isn’t for you anymore – any number of things can mess up the 330-day calculations. Best not to spend Uncle Sam’s money before he generously bequeaths it back to you next year.

If you’re doing your taxes on your own instead of hiring a filing service, not every tax software supports the FEIE itinerant option. Democrats Abroad maintains a great list of tax software for expats with their costs. We used OnLine Taxes and had no problem filling out the FEIE section, plus it was free! Please consider an option like this if you don’t enjoy filing complicated taxes. Intuit/TurboTax and many other big firms lobby the US government to keep taxes complicated, using the profits from selling tax software every year.

401(k)s, Roth IRAs, and the FEIE

Contributing to a Roth IRA

One big caveat for anyone planning on using the FEIE and saving for retirement – you need earned income to contribute to a Roth IRA. If you exclude all of your income under the FEIE, you don’t qualify to contribute to a Roth IRA.

I had to file a Return of Excess Contribution form after accidentally contributing to my Roth IRA. I caught it before the end of the tax year, so it was a relatively painless process. But I’d recommend holding off on any Roth IRA contributions if you’re planning on using the FEIE, at least until the end of the year when you can be more certain about your eligibility.

Contributing to a 401(k)

401(k)s are still fair game, even if you exclude all of your earned income. If you have access to one, consider a Roth 401(k). If you’re paying no taxes already, then tax-deferred contributions to a traditional 401(k) aren’t very juicy. But contributing after-tax money to a Roth 401(k), when the tax rate is 0%, is a great double whammy. And if you’re earning more than the FEIE exclusion limit (good for you), a traditional 401(k) becomes quite attractive again.

Conclusion

Don’t let the tax tail wag the dog. Becoming a digital nomad is a huge life change and definitely not for everyone. Ultimately, the lifestyle certainly wasn’t for us.

You shouldn’t consider leaving the US to travel full-time just to save on taxes. But if it’s something you’re already leaning towards or already doing, the FEIE can save you huge amounts of money on your taxes. The government certainly isn’t going to give you a heads-up about this massive tax break, but hopefully this article is a good starting point for your nomad tax planning.

Questions? Comments? We’d love to hear from you in the comment section or feel free to write us directly.

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