While the idea of living tax-free while traveling the world or roaming the U.S. in an RV might be tempting, it’s time to learn the tax truth for digital nomads and RVers.

I get it. Who wouldn’t want to escape a 9-to-5 and a big state tax bill? But the reality is more complicated for U.S. citizens who are digital nomads or full-time RVers. While the freedom of movement is real, the freedom from taxes isn’t so simple.

Tax-Free Travel for Digital Nomads

The United States is one of the few countries that taxes its citizens on their worldwide income, no matter where they live. Whether you’re freelancing from a co-working space in Colombia or running your business from a national park in Utah, the IRS still expects a tax return if you’re a U.S. citizen.

This doesn’t mean there are no opportunities to reduce your tax bill. In fact, digital nomads and RVers often have more flexibility than traditional employees—if they know how to use it.

The Challenge of State Taxes for RVers

For RVers who travel within the United States, state taxes often present the biggest headache. Even if you haven’t set foot in your “home state” in years, it may still consider you a resident for tax purposes unless you’ve officially changed your domicile.

Changing your domicile isn’t as simple as canceling your lease or hitting the road. States look at where you vote, where your driver’s license is issued, where your car or RV is registered, and where your important personal and financial ties are, like doctors, banks, etc. That’s why many RVers proactively establish residency in states like Texas or Florida — states that have no income tax but also have systems in place to accommodate full-time travelers.

Unless you make a clean break, your old state may keep trying to tax you, regardless of where your head is sleeping each night. This is an important tax truth for digital nomads.

The Foreign Earned Income Exclusion (FEIE)

If you’re a digital nomad spending most of your time outside the U.S., the Foreign Earned Income Exclusion (FEIE) can be a game-changer. It allows you to exclude a significant portion of your earned income from federal income tax, as long as you meet specific criteria.

There are two primary ways to qualify. One is the Physical Presence Test, which requires you to spend 330 full days outside the U.S. in any 12-month period. The other is the Bona Fide Residence Test, which involves establishing a more permanent life in a foreign country for a full calendar year.

It’s important to understand that only earned income—wages or income from self-employment—qualifies. Passive income, like dividends or rental income, doesn’t. Also, the income must be earned while you’re physically outside the U.S., even if your clients or customers are American.

And while the FEIE can lower or even eliminate your income tax, it doesn’t exempt you from self-employment tax, which covers Social Security and Medicare.

No FEIE for Domestic Travelers—But Planning Still Pays Off

If your travels keep you within U.S. borders, the FEIE doesn’t apply. That doesn’t mean you’re out of options. RVers need to be especially smart about how they manage their state ties.

Many full-time RVers proactively change their domicile to a no-income-tax state and take steps to sever ties with their former home. This may include switching vehicle registration, updating your mailing address through a mail forwarding service, getting a new driver’s license, and relocating professional licenses and voter registration.

The IRS isn’t your only concern. If your former state can argue you still have connections there, you might find yourself facing unexpected tax bills, even if you haven’t been back in years.

Other Ways to Optimize Taxes on the Road

Beyond the FEIE, there are other tools that can help. If you live abroad, you may qualify for the Foreign Housing Exclusion or Deduction, which allows you to write off certain housing costs. You might also be able to claim a Foreign Tax Credit if you’re paying income tax in another country, helping to avoid double taxation.

And for business owners and freelancers, structuring your business correctly can open the door to further tax advantages. Choosing the right entity type, tracking travel-related business expenses properly, and managing where and how your income is earned can all make a big difference.

Common Myths That Can Get You Into Trouble

There are plenty of misconceptions floating around the digital nomad and RV communities. One of the biggest is the idea that you don’t have to file taxes if you’re not living in one place. Unfortunately, that’s not true. If your income exceeds the minimum threshold, you’re required to file a return—even if most or all of your income ends up being excluded.

Another common misunderstanding is that remote work means location doesn’t matter. In reality, where you are physically located when you do the work is crucial. If you’re sitting in a California coffee shop while freelancing, the income earned during that time is likely considered California-sourced, even if your client is in another state or country.

Staying Legal While Minimizing What You Owe

Living a nomadic lifestyle doesn’t mean giving up control over your finances. In fact, it’s the opposite. With the right planning and good advice, you can reduce your tax burden while staying 100% compliant.

Whether you’re a globe-hopping digital entrepreneur or a full-time RVer exploring the national parks, your tax situation is more complex than the average person’s. But that complexity also creates opportunity, especially if you work with professionals who understand the nuances of nomadic tax life.

Want to Talk Strategy?

We help digital nomads and full-time RVers:

Determine FEIE eligibility and file correctly

Change domicile to a tax-friendly state

Accurately source income across borders and states

Set up business structure correctly for the best tax scenario

Plan ahead for long-term financial success on the road

If you’re ready to stop guessing and start optimizing, let’s talk.