Tax Deduction Guide for Digital Nomads, Including Free Tax Deduction Spreadsheet Excel

Tax Tips for Digital Nomads, Including Tax Deduction Spreadsheet Template Excel

Managing taxes as a Digital Nomad is a vital step in your online career. Staying up to date with the latest tax advice will not only help you stay compliant on the road, but can also save you a significant amount of money too.

Business-owning taxpayers are entitled to deductions; but what about deductions for the unique challenges digital nomads face with their online business?

Technological advancements now make it possible to conduct your business from anywhere, and even without a traditional office, there are various expenses related to your business that are deductible.

The expenses you incur in the name of earning your living will be deductible, if they are ordinary and necessary for business purposes.

Read on for your free Tax Deduction Spreadsheet Excel and more about Tax Deduction for Digital Nomads.

The Mobile Workplace:

Conventional workspaces are not always feasible for Digital Nomads who traverse continents. However, there are deductions available for temporary workspaces.

🌐 Co-working Spaces and Offices

The dynamic nature of digital nomadism involves a continuously shifting workspace.

This can entitle you to significant deductions for the cost of office space/co-working memberships that are internationally used, making the rent-based approach of co-working spaces fiscally beneficial.

Members save money by only paying for the time they actually use the co-working space, and then they can even deduct it afterwards during tax season.

Alongside the deduction for the office space itself, are other expenses such as renting a conference room, printing costs, and networking events.

However, associated costs, such as transportation and parking fees are typically not deductible.

🧳 🏨 Airbnb

If you are permitted to deduct a home office, then can you also deduct Airbnb as a business expense?

The deduction of Airbnb as a business expense is complex but it can be considered as a ‘travel expense’ under the right circumstances.

Your tax home is where you work, and you can only deduct travel expenses outside your tax home. For most Digital Nomads, Airbnb would not constitute as a travel expense because their tax home is constantly changing.

The Airbnb deduction would be where you have a tax home in one place, and you have to leave that place and travel temporarily for work while staying in an Airbnb.

Travel expenses away from your tax home for business purposes include expenses that are common, accepted, helpful, and appropriate in one’s line of trade or business.

Exception to the Rule: US-based digital nomads who spend at least 330 days out of a consecutive 12-month period travelling internationally may qualify for the Foreign Earned Income Exclusion. This exception could make Airbnb expenses or a portion of a ‘home office’ deductible.

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Devices and Related Costs:

Deductions can also be claimed for capital expenses, such as laptops and phones, and operating expenses like internet and phone data charges.

💻  Laptops and Wi-Fi

The IRS’s standard for a legitimate deduction requires the item to be a usual, necessary, customary, and reasonable expense for your type of work.

For this reason, hardware like laptops and related accessories would be considered tax-deductible as an appropriate business expense for Digital Nomads.

To deduct laptop costs in Canada, Australia, the US, or the UK, it is allowable to deduct the amount your laptop is used for work. This means if you use your computer only 50% for business and 50% for keeping up with Instagram or watching your favourite tv shows, then you can only claim back that 50%.

A cost you may not have considered yet is Wi-FI. Buying internet packages to work while abroad is a business essential commonly forgotten by Digital Nomads and remote workers.

📱Phones and SIM Cards

Much like laptops, phones are necessary for conducting business and are therefore tax-deductible, based on the percentage used for work. Just ensure you can give a reason to why it is a necessary and rational expense for your type of work.

Similarly, SIM cards, essential for connecting to local networks, can also be deducted.

The Cardinal Rule: Keeping Track

It’s crucial to maintain detailed records of your business’s income and expenses for potential deductions. Be diligent because self-employed people are more frequent targets of audits. 

It is advisable to keep personal and business finances separate to avoid any confusion later down the line.

Using a specific payment method for business expenses, such as a credit card tied to your business bank account, is the best approach.

Download your free Tax Deduction Spreadsheet Template Excel here:

I hope you enjoyed this mini Digital Nomad Taxation Guide & FREE Tax Deduction Spreadsheet Template Excel – don’t forget to share with all your fellow digital nomads to assist with their own remote lifestyle!

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Disclaimer: While I strive to provide accurate and helpful information on a wide range of topics, it is essential to note that I am not a tax specialist. I do not hold myself out to be a tax advisor. My knowledge is based on my experience, general principles and concepts, and the information provided should not be considered as specific tax advice tailored to your unique circumstances. For personalised guidance on tax-related matters, it is always best to consult with a certified tax expert or professional who can assess your individual situation and offer the most relevant and up-to-date recommendations. Remember, proper tax planning and adherence to tax laws are crucial for financial stability and compliance, so seeking expert advice is a wise decision.

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