Self-Employment Tax & US Social Security Benefits for US Expats
December 4, 2020 | Self-Employment, Social Security | 2 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.
Updated December 20, 2024
All blogs are verified by Enrolled Agents and CPAs
Updated December 20, 2024
For those who are self-employed American expats – you are courageous people whether you became one from necessity (it’s not easy to find a job in a different country!) or personal desire – congrats! Being self-employed is no easy task, especially when it comes to American taxes.
Aside from ensuring you’re getting enough sales to cover costs and provide you with a good living, you also have way more complicated taxation laws.
Self-Employed American Expats
You may ask why it is complicated?!
Well, you probably already know that you can exclude your self-employment net earnings from normal U.S. income taxes. However, this by no means implies that you can automatically exclude them from self-employment taxes as well.
What does that mean money-wise? Well, even if you exclude your total income from US taxation, you still need to calculate the 15.3% Self-Employment Tax on your foreign SE net earnings that total over $400. That’s a lot!
But fear not; we at MyExpatTaxes can support self-employed American expats with their taxes.
The Totalization Agreements for US Citizens Abroad
The US has made agreements with many countries worldwide regarding Social Security taxes. These countries and the US have ensured that global citizens (including US Expats) won’t face double taxation on their worldwide income and Social Security wages. See a list of all the countries in line with the Totalization Agreement on the IRS website.
So cool, there’s a treaty for that. But how do you actually use this treaty on your return?
- Make sure you’re in a country with a supporting Totalization Agreement
- Get a Certificate of Coverage proving your local coverage
- Attach this Certificate of Coverage to your Tax Return and make sure you explain to the IRS that you’re exempt from Self-Employment Tax
& voila! That’s how you can make your life as a self-employed US citizen abroad a bit easier and keep your profits in your pocket!
Written by Nathalie Goldstein, EA
Nathalie Goldstein, EA is a leading expert on US taxes for Americans living abroad and CEO and Co-Founder of MyExpatTaxes. She contributes to Forbes and has been featured in Forbes, CNBC and Yahoo Finance discussing US expat tax.
December 4, 2020 | Self-Employment, Social Security | 2 minute read
