So……………………..taxes kick your ass this year?
*plunks boot heel up on old steamer trunk*
If you’re in business for yourself, you were prooooobably scrambling around for an extra ten, fifteen, twenty grand or so of loose change, come the beginning of April. Real neat surprise, particularly for new creators who didn’t exactly plan for taxes. 🤣 (You’re like, shoot Ash, I can hardly plan my grocery lists.)
ALAS, I thought it might be worth mentioning a liiiiiittle money 💵 hack you should probably know about, especially if you’ve got digital nomad dreams on the brain. (I mean, who doesn’t have digital nomad dreams on the brain?!?!)
It’s a little somethin’ somethin’ that only digital nomads know about—and it can save you the equivalent of a navy blue mid-sized Sedan (with a panoramic roof) each year.
Ready for this?
Okay. I’ll tell you THE SECRET. (Disclaimer: this only applies to American tax law because that’s what I’m familiar with, but if you’re a resident of a different country, you probably have something similar. Oh, and I’m not a tax professional, so don’t quote me. 🥳)
The $25,000 Reason Why You Should Become a Digital Nomad
- If you become a digital nomad…
- And you jet off to some place like Lisbon, or Dubai, or Rome this year (or all three!) …
- And you spend 35 days or less in the United States during any 365-day period?
Your first $112,000 in income is TAX FREE.
You didn’t read that wrong. This is not a drill. Legit, your first $112,000 is exempt from U.S. taxes. (Because, yes, you still have to file & pay U.S. taxes while you’re a U.S. citizen, no matter where you are.)
That means you keep an extra ~$25,000 in your pocket, all to your merry little self. 😲
Do you know what you could do with an extra $25,000 a year in free money? Talk about a smart savings plan! You won’t find a better return for your money. Stay abroad for 3 years and you’ve just socked an extra $75,000 away into your retirement account / down payment for a house account / build wealth account. And that doesn’t even count all the extra savings from a lower cost of living, which can be sig-nif-i-cant. (I still can’t believe that glasses of excellent wine in Spain were $2.)
And get this? If your spouse qualifies, too, then both of you can take advantage. That’s $224,000 of earned income that’s exempt from income tax.
That’s not to say you don’t still pay self-employment taxes, but your income totally gets a big, fat break. You’re not in the U.S. using up resources, they hook you up with a deal. 🤷♀️
This incredible little law is called the Foreign Earned Income Exclusion—and it’s a huge PLUS in the ol’ “let’s try out this digital nomad thing for a while” column. I first qualified for the exemption in 2011 when I moved to Chile, and ever since have qualified like 900 of the 1200 years I’ve been living abroad as a digital nomad. (Except for when I bought the property in Philly and spent months playing interior designer, LOL. Twice I got socked. 🤣) So, let’s see…over the course of eleven years of nomading, minus two years of not qualifying, that’s 9 years x $25,000/y = $225K. Then you invest that money, and voilà! It becomes exponentially more.
Which is all to say: if you’re thinking about becoming a digital nomad? This is one REALLY great way to sell it to your in-laws. 😁 Instead of “Sarah’s off being irresponsible, chasing all sorts of ridiculous pipe dreams,” the conversation is now, “Sarah’s strategically minimizing her tax burden while she gets her business off the ground—she’s a smart cookie, that Sarah!”
See what a little positioning can do?
If you’re like yasssssss, this is what I NEED TO DO: the people who handle my books & taxes are Bench—I love them and that’s my partner link, which will give you 30% off your first 3 months. 🎉
HIGHLY RECOMMEND. Especially if you’re going to be having fun adventures like this. ❤️
I hope this totally helped push you over the ledge just a litttttle bit more to come over to the dark side.
Being a digital nomad may mean that you can never again shower with appropriately-sized wash clothes (in France, we literally brought towels into the tub), but IT WILL ALSO MEAN that you are officially ahead of the game in other ways that your peers can never be (and I don’t just mean your time zone).