No strings attached: What it means to be a digital nomad

Headshot for Amanda Graber, Content Marketing Specialist for ComplYant, a business tax tool for entrepreneurs and small businesses.
By Mandy Graber
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Imagine regularly starting your workday with a new view. This week, you’re working on a presentation with sand between your toes while listening to crashing waves. Next week, you’re taking meetings, and the mountains in your background are real, not a digital recreation. A month before, you sipped coffee at a quaint metropolitan cafe while editing spreadsheets. 

The COVID-19 pandemic forced many companies to embrace working remotely. Some businesses only did this as a temporary measure. Remote work wasn’t a fit for every industry. However, COVID-19 did change the way many companies operated. Employees and their employers saw the benefits of remote work firsthand. Some adapted to continue using remote work practices even after COVID restrictions eased. 

Working remotely is a desirable benefit for lots of reasons. Employees spend less time and money commuting. Their schedules also tend to be more flexible. Having more control over their time can lead to better work-life balance. A recent study also claims remote workers are more productive. This is likely due to fewer distractions. 

Many remote workers have a consistent work location. Others might want to change their surroundings regularly. For them, being a digital nomad might be an option. Of course, there is a difference between working remotely and working from home. Take time to consider if being a digital nomad will work for you. If you’re an employee, check if company policy allows you to do so. 

If you dream of working globally, it's possible. You can connect with coworkers and clients from distant locales. For digital nomads, this type of lifestyle is a reality. They’re able to work almost anywhere. All they have to do is bring their laptop and access the internet.  

The definition of a digital nomad

Many define a digital nomad as someone who works while traveling. It’s assumed that working outside an office provides the freedom to live anywhere. Often, this can be true. However, there can be nuances to every situation. Simply not commuting into an office doesn’t make you a digital nomad. 

To be a digital nomad, a person has to travel while working. They make their journeys a part of their day-to-day life and perform their job regularly. However, other roles work outside an office but aren't digital nomads.

Freelancer or independent contractor

These professionals may not maintain traditional office space. However, they are not necessarily digital nomads. They would need to incorporate traveling alongside their work as part of their lifestyle. Many contractors and freelancers work outside of an office for practical reasons. They aren't doing so because they want to travel the world. 

Remote worker

Remote workers are employees that work outside the office. Some remote workers can be digital nomads– if they travel. Many remote workers are “work-at-home” employees. They are required to maintain consistent office space. These employees may be “location independent.” They can live anywhere but cannot travel while working. Instead, they take time off from work if they want to do so. 

Traveling company representative

Employees who travel for work may see a lot of the world. This isn’t quite what people mean when they refer to digital nomads. A sales rep who travels around the globe may log many airline miles and eat a lot of foreign cuisines. However, that sales rep travels under the direction of the company. Digital nomads are in control of selecting their own destinations.  

Digital nomads don’t work in just one industry. Instead, they come from a variety of professional backgrounds. Many are web, software, or mobile developers. There are influencers and other content creators who travel while they work. Writers and designers can be digital nomads. Others work in data processing, engineering, and education. Some work in finance or with eCommerce companies. Lots of digital nomads are entrepreneurs and startup founders. More and more of the world is embracing online and remote practices. The digital nomad lifestyle is opening to more professionals. 

| Digital nomads are able to work almost anywhere, provided they can bring their laptops and access the internet. 

Pros and cons of being a digital nomad

Consider the advantages and drawbacks of being a digital nomad. You should be sure this lifestyle is right for you before diving in. Some professionals decide to find a different balance. They may take a sabbatical to focus on travel instead of work. Others live as digital nomads for just a set amount of time. Then they settle down into permanent residence. What’s right for you depends entirely on your situation. 

Advantages of being a digital nomad  

  • The ability to travel - The main perk is the ability to travel. It’s the reason professionals choose this lifestyle. Digital nomads move freely through the world. They work their job from anywhere. When they’re off the clock, they explore new countries. They can try different cuisines and learn about diverse cultures.
  • Flexibility - Digital nomads often set their own schedules. This can help them take advantage of their travels. They get the most out of the locations they visit while meeting deadlines for work. 
  • Meet new people - Being a digital nomad means meeting new people. They meet fellow digital nomads and new people in the places they visit. Many cities have digital nomad communities that offer support.
  • Lower cost of living - Results may vary on this advantage. Some digital nomads report that their monthly expenses decreased. Others find that amounts stay relatively the same. For some, traveling increased their expenses. Ultimately, some strategy has to be used. It takes balance to see desired destinations while saving money..

Disadvantages of being a digital nomad 

  • Extra paperwork to the destination - Traveling while working can complicate the situation. In the United States, depending on the circumstances, a person may have to declare income in any state they’ve worked. There is even more paperwork waiting for digital nomads working abroad. Many countries require visas and other procedures before arrival. Travelers need to review all bureaucratic steps before they set out for their destination. 
  • Extra paperwork to the employer - If a digital nomad works for a traditional employer, they’ll have to work out logistics. Communication is a major issue. Internet and cell phone service need to be consistent. Also, the team will need to be able to speak to each other from time to time. This can become complicated as the digital nomad moves across time zones or if paperwork has to change hands. Fortunately, these obstacles aren’t impossible to navigate. They simply require a little extra planning.
  • Lack of stability - Some report a decrease in stability. This extends beyond constantly changing locations. Instead, this feeling is often attached to a lack of routine. This can lead to a lack of motivation. Some also report a lack of stability in their income. Often this is due to fluctuations in their freelancing or contracting work. 
  • Homesickness - Being a digital nomad can mean meeting new people. However, it can also be a lonely experience. After all, friends and family are often back home. It’s easy for digital nomads to feel like they're missing out on the lives of their loved ones. 

What being a digital nomad could mean for your taxes 

A major factor in being a digital nomad is your taxes. Many digital nomads complain about tax obstacles when they begin traveling the world. The truth is even living abroad doesn’t mean you’re spared from federal taxes. Instead, the United States uses a citizen-based tax code. If you’re considered an American, then you owe taxes, no matter where you live.

Fortunately, taxes for digital nomads don’t have to be an obstacle. There are some available tax credits and deductions available to American citizens living aboard. 

  • The Foreign Earned Income Exclusion allows those living abroad to reduce their taxable foreign income. To qualify, they must pass one of two tests. The first is a physical presence test. The other is a bona fide residence test. 
  • The Foreign Housing Exclusion lets digital nomads deduct housing expenses from their taxes while living abroad.
  • The Foreign Tax Credit is used by digital nomads who pay income tax to the foreign country where they reside. It helps to prevent them from being double-taxed. Income already excluded in the Foreign Earned Income Exclusion can’t be applied here.

Be prepared for wherever the road leads 

You've decided being a digital nomad is right for you. That's wonderful. Now you should choose a strategy that works for you. You might find a traditional employer that allows you to both work and travel. If you freelance, you make your own rules. No matter what, have a plan in place. Set a budget. Keep all of your vital paperwork organized. 

And be sure to keep your taxes in order. Deadlines can sneak up on you, and late penalties and fines can be costly. Your money should go toward your travels, not interest on tax underpayments. With a free account, ComplYant can help you stay up to date, so you never miss a deadline. The entire resource hub is full of information. Check out great webinars you can access on the go. Taxes don’t have to be a worry. You can focus on the adventures that await and travel safely.

Headshot for Amanda Graber, Content Marketing Specialist for ComplYant, a business tax tool for entrepreneurs and small businesses.
By Mandy Graber
Mandy is a seasoned content creator with experience in a wide variety of industries. She works alongside our ComplYant Tax Experts to help make tax-related content more accessible to everyone. In her long tenure as a writer and content creator, she has covered a wide array of topics, including insurance, education, financial technology, and more.

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