Imagine sipping espresso in Lisbon while replying to clients. Or writing code from a Bali bungalow. The digital nomad dream is more real than ever…but there’s one thing most people don’t talk about: taxes.
If you’re making money while hopping countries, there’s a right way and a very wrong way to do it. In this article, I’ll break down how to legally work from anywhere, protect your money, and actually live the freedom lifestyle…without getting crushed by the IRS or foreign tax surprises.
- 📌 Pro Tip: I recommend ZenBusiness, which helps you set up your LLC in minutes for $0 plus state fees. It’s what I have personally used for my businesses, and the whole process took me less than 5 minutes.
The Myth of the Digital Nomad Free-for-All
When people think of digital nomads, they picture someone working from a beachside hammock, getting paid through PayPal, and never worrying about taxes or business paperwork.
The truth? That fantasy is exactly how people end up in trouble.
Sure, it feels like you’re living outside the system — until a client asks for a contract you can’t provide… or your bank flags your account because your income looks “suspicious”… or you realize the IRS still wants their cut, even though you’re working from a hostel in Thailand.
Operating as a “free agent” might seem liberating at first, but the longer you travel and earn money online, the more you realize: you need structure, or you risk losing everything you’ve built.
I’ve seen creators get locked out of Stripe for not having a legal business. I’ve watched freelancers panic when a brand asked for a W-9 they didn’t have. These are avoidable problems, but only if you stop winging it.
- Wondering what’s the best place to legally work abroad in 2025? I highly recommend Tallinn, Estonia…read my guide!
Why You Need a Legit Business Structure
If you’re earning money while working remotely — whether it’s through freelancing, coaching, affiliate income, content creation, or consulting — you’re already running a business. The only question is: are you doing it in a way that protects you?
Setting up a legal business structure, like an LLC (Limited Liability Company), does a few crucial things:
- ✅ It separates your personal finances from your business, which protects your assets if something goes wrong
- ✅ It makes you look legit — clients and platforms take you more seriously when your invoices come from “Your Name, LLC”
- ✅ It opens the door to real tax benefits, like writing off a portion of your rent, travel, laptop, Wi-Fi, software, and more
- ✅ It prepares you for growth, whether that’s hiring, getting paid globally, or setting up business banking
Here’s the good news: You don’t need a lawyer or accountant to set this up. I’ve used ZenBusiness to form my LLCs in under 10 minutes. It cost me $0 (just the state filing fee), and they handled all the confusing paperwork for me.
- Read my guide: My Favorite Underrated Cities for Creative Entrepreneurs
How U.S. Taxes Work for Digital Nomads (and Why an LLC Helps)
Here’s what most digital nomads don’t realize: If you’re a U.S. citizen or green card holder, you must file U.S. taxes — no matter where in the world you live. The IRS taxes based on citizenship, not location.
But that doesn’t mean you’ll be double-taxed. That’s where the Foreign Earned Income Exclusion (FEIE) can help.
Key Tax Form: Form 2555
This form lets you exclude up to $120,000+ of foreign-earned income (as of 2025) if you qualify. To claim it, you must pass one of two tests:
- Physical Presence Test: You spend at least 330 full days outside the U.S. in any 12-month period.
- Bona Fide Residency Test: You’ve established a tax home in a foreign country for an uninterrupted period including a full tax year.
You may also need:
- Form 1116 (Foreign Tax Credit)
- Schedule C (if you’re self-employed)
- FBAR (if you hold foreign bank accounts with over $10k combined)
- 📍Pro Tip: These rules can get tricky depending on how many countries you visit or how often you return to the U.S. Always talk to a tax advisor who specializes in expat or nomad taxes.
If you’ve been waiting to “make things official,” this is your sign.
Other Advantages of Setting Up an LLC
Beyond tax perks, here are some other reasons why you should form an LLC:
✅ You can set up a U.S.-based LLC no matter where in the world you are.
✅ It gives you a home base for your business — for banking, payments, and client contracts.
✅ It avoids the messy complications of registering a company in a foreign country (trust me, that rabbit hole gets deep and expensive fast).
An LLC helps simplify everything, especially if you’re hopping between countries or living the long-term nomad lifestyle. You stay compliant, avoid sketchy gray zones, and look 100% legit to clients and payment platforms.
Not sure which formation service is right for you?
- 👉 Check out this side-by-side comparison of the top LLC services to see which one fits your goals and budget best.
How to Set Up Your Business from Anywhere (Step-by-Step)
You don’t need a legal background, a fancy accountant, or a pile of startup money to get legit. If you’ve got Wi-Fi and 10 minutes, you can set up your LLC from anywhere in the world.
Here’s how to do it:
✅ Step 1: Choose Your Business Name
Make it official — even if it’s just you for now. Your name + a word like “Creative,” “Media,” or “Solutions” works great.
✅ Step 2: Pick Your State
Most digital nomads choose:
- Wyoming or New Mexico for privacy and low fees
- Or your home state if you’re maintaining U.S. residency
✅ Step 3: File Your LLC
I’ve used ZenBusiness because they make it stupidly easy.
- It starts at $0 + state fees
- They walk you through everything
- You’re done in 5–10 minutes
- No confusing paperwork or legal headaches
✅ Step 4: Open a Business Bank Account
Once your LLC is active, open a remote-friendly account with Wise or Mercury.
This keeps your finances clean (and tax season sane).
✅ Step 5: Start Writing Off Business Expenses
Your laptop, Wi-Fi, coworking spaces, gear, and parts of your travel can now be legit business expenses — depending on how you operate.
📍 Pro tip: Keep receipts and track expenses from day one.
Ready to go legit and protect your business?
- 👉 Start your LLC with ZenBusiness here — it’s free to file, fast, and beginner-friendly.
My List of Great Countries Where Americans Can Work Abroad
Beyond Estonia, where I already mentioned, here are my favorite countries that are best for working abroad.
1. Portugal 🇵🇹
Portugal has quickly become one of the most popular destinations for remote workers. Americans can apply for the D7 Visa (also called the passive income or remote worker visa) if they can show steady income, or the new Digital Nomad Visa with a minimum income of about €3,280 per month. I love Portugal for its laid-back lifestyle, coastal cities like Lisbon and Porto, and relatively affordable cost of living compared to the rest of Western Europe.
2. Spain 🇪🇸
Spain launched its Digital Nomad Visa in 2023, allowing Americans to live and work remotely for up to 5 years with a minimum income of about €2,200 per month. I’ve spent months living in Spain, and it’s one of the best places for culture, food, and climate. Barcelona is vibrant and international, while Valencia offers a more relaxed, affordable lifestyle.
3. Croatia 🇭🇷
Croatia was one of the first EU countries to roll out a Digital Nomad Visa. It lets Americans stay up to 3 years while working remotely for a non-Croatian employer. The cost of living is much lower than Western Europe, and coastal towns like Split and Dubrovnik are incredible bases if you love the sea.
4. Costa Rica 🇨🇷
Outside Europe, Costa Rica is a fantastic option. The Rentista Visa allows Americans to stay long-term if they can show steady monthly income (about $2,500) or savings. There’s also a new Digital Nomad Visa that makes it even easier for remote workers. I love Costa Rica for its nature, wellness culture, and community of expats and entrepreneurs.
5. Mexico 🇲🇽
Mexico is one of the easiest and most affordable options. Americans can stay up to 6 months visa-free, and many digital nomads simply leave and re-enter to reset their stay. For longer-term living, the Temporary Resident Visa (up to 4 years) is available if you can show around $2,600 monthly income or $43,000 in savings. Cities like Mexico City, Oaxaca, and Playa del Carmen have thriving digital nomad communities.
FAQs on Working Remotely and Taxes
- Do I still owe U.S. taxes if I live abroad full-time?
Yes — U.S. citizens must file taxes no matter where they live. But you may qualify for exclusions like FEIE to reduce your bill. - Can I use an LLC if I travel all the time?
Absolutely. You can form a U.S.-based LLC even if you’re living abroad. It simplifies taxes, contracts, and payments. - Do I need to pay taxes in the countries I visit?
That depends. If you’re in a country short-term (tourist visa), you usually won’t owe local taxes — but always double check.
TL;DR – What You Need to Know on Working and Traveling Abroad
Working from anywhere is possible, but only if you set yourself up the right way. That means forming an LLC, understanding your U.S. tax obligations, and keeping your finances clean. Do it right, and you can enjoy the freedom lifestyle without getting crushed by legal or tax surprises.
- 👉 Start your LLC with ZenBusiness — it’s free to file (just pay your state fee), beginner-friendly, and takes under 10 minutes.
