Here’s an interesting fact. Most American expatriates who are considering forsaking their US citizenship, i.e. officially giving up the most-coveted nationality in the world, are doing so because of American taxes. In other words, even while living abroad they are still compelled to pay taxes to the United States.
The reason we’re bringing that up, even though the overwhelming majority of those expatriates aren’t digital nomads, is to point to the simple fact that US taxation ain’t no joke.
The United States boasts what has to be one of the most-comprehensive tax-collection systems on Earth. Or put otherwise if you are employed in the US, pretty much the only way to avoid paying taxes, without risking being fined or incarcerated, is to be an undocumented worker.
And truth be told, even if most Americans do reason to themselves ‘no, I’m not paying taxes anymore’ it really doesn’t matter, because the majority of US employees already have their taxes deducted even prior to receiving their paychecks.
Greetings From Abroad recently pointed out in another post that there is no such thing as a US visa designated specifically for digital nomads or remote workers, nor does it appear that one is in the works. Or viewed from a different angle, currently the American government is not privy to granting digital nomads any type of special consideration.
So with that in mind, whether or not you end up paying taxes in the United States as a digital nomad is dependent on a number of factors, which we will attempt to generally and comprehensively cover below.
And for the most part, this article is being written with foreign digital nomads in mind, i.e. those residing in or thinking about visiting the United States who are not US citizens.
There’s a good possibility that if you are a digital nomad officially working for a company based in the United States, your employer will deduct the necessary taxes from your pay beforehand. If you are in the US under such cases, you would want your boss to provide you with a pay stub as proof that said taxes were indeed paid.
The United States is a very law enforcement heavy country, and you never know when immigration or whoever may request evidence that you’re not only employed but also paying taxes.
However, if your employer is not based in the United States, then by the looks of things as a visiting digital nomad (i.e. nonresident alien) you will not be subject to paying US taxes (so long as you stay under six months, which we will get to later).
You may find yourself in a position, i.e. more of an informal arrangement, where your employer is based in the US alright, but the income you generate is not being taxed. Under such circumstances the onus would then be on you, if compelled, to make the necessary tax payments yourself.
That means you would likely have to consult someone, i.e. a professional or somebody you trust with notable tax-filing experience, as unfortunately US tax laws can be incredibly complicated.
But if said individual is really good at what they do, they’ll probably be able to find some loopholes for you. And hopefully, you won’t end up paying so much tax that doing so ends up negatively affecting your trip.
Your Own Aspirations
Being a foreign digital nomad in the United States grants one a certain degree of flexibility. For instance, if your employer is situated in, say, India and you’re able to attain entry into the US with a B1/B2 Visa, you will not be required to pay US taxes. But if you’re visiting and your employer is likewise stateside, you do.
By contrast if you’re an actual American digital nomad, i.e. a US citizen engaged in digital nomadism, then no matter where you are in the world, the US government is expecting you to pay taxes to the homeland (thus going back to the expatriation gripe at the beginning of this post).
So concerning that advice we gave a bit earlier, you may be asking why pay taxes if you’re not required to? That recommendation was more along the lines of our way of saying that you may want to find some official to make a monetary contribution to the government.
Or put more bluntly, if you’re intending to eventually apply for a visa extension (beyond the six months the B1/B2 offers) or even permanent residency, then having such a relationship with govvie would logically prove to your benefit.
The Weighted System
And speaking of extended days, once you do go beyond six months – or 183 days to be exact – then you will be legally required to pay taxes. This is also true for non-immigrants who visit the States regularly.
The government has what is referred to as a “weighted” system in which even time spent stateside over a four-year period are all counted towards that 183 days. So if, as a digital nomad, you visit the US annually for four years straight, they will count your stay cumulatively (though days spent during the three previous years don’t hold full “weight” like the current one).
Therefore even citizens from countries that don’t have to go through all types of drama to enter the US, if they remain stateside long enough they would have to pay taxes. And we would imagine that unless you’re really making a healthy income, being a digital nomad in the States while getting taxed would kinda suck. And that brings us to the final entry on this list, which is…
It would be sweet to go to the US as a short-term digital nomad, meaning you wouldn’t have to pay taxes (unless your employer is in the States), though with a large enough income that you can really enjoy the country.
That would be the American dream as far as diehard digital nomadism is concerned. But on the flipside of that equation, it wouldn’t be particularly wise to force your way into the US, whether you’re paying taxes or not, if your funds aren’t adequate.
There’s plenty of other places in the world – many of which we’ve already listed in previous posts – where you can go, even with the official distinction of being a digital nomad, that also have a much lower cost of living than the United States.
Most of the nations that fall into that category are also a lot easier to gain entry into. Again, we understand that America is the premiere migration/tourist destination of the entire world. And we’re also well aware that there are a number of cities in the United States where you can have a good time as a digital nomad. But you wouldn’t want to be in any of those locations as a foreigner lacking in funds.
The society at large tends to frown upon outsiders, especially those not from preferred destinations, who find themselves within their borders without adequate means to support themselves.
Being in the United States as a digital nomad is cool. The US alone is twice as big as the entire Schengen Area. In other words, if you are to attain a B1/B2 Visa or better, that single document will give you access to 50 states and innumerable cities.
But at the same time, ideally it won’t be a situation where your eyes are bigger than your wallet. Some countries allow digital nomads to stay tax-free. The US, in a manner of speaking, is one of them, to some degree. But if your employer is based in the States or if you do end up staying over six months, you will likely find yourself being taxed. And if you’re already finding it hard to make ends meet beforehand, then having to compensate the government is likely to make matters even worse.