Self employment taxes for expats

If you are self-employed, the rules are generally the same if you are living in the US or abroad.  That means that self employed persons need to pay Social Security tax and Medicare tax on the total earning for self-employment over $400.  For the current year, the maximum amount subject to social security taxes is $117,000.  There is no maximum amount for the Medicare portion.

If eligible, an expat taxpayer can use either the Foreign Earned Income Exclusion (form 2555), or the Foreign Tax Credit (form 1116) to reduce the total taxes owed on the earnings. However, this does not include the Social Security tax or Medicare Tax.  Therefore self employed taxpayers living abroad often still owe taxes to the IRS.


             While most expat taxpayers still have to pay Social Security and Medicare taxes while living abroad, the US has agreements with several countries to eliminate dual coverage between the two countries.  These are the Bilateral Social Security (Totalization) agreements.  See for a total list of Totalization Agreements.  In general, most taxpayers who are self employed who live in a country with a Totalization agreement with the US, will only have to pay these taxes to their country of residence, and not to the US.  However, each country has its own agreement with the US and it is important to see the specific rules of the agreement for each country.  In addition, the taxpayer may be required to obtain certification of taxes paid from the country of residence.  Your tax advisor can help you obtain this certification.


Still have questions?  Feel free to Contact Us and we can call or Skype with you.