If you’re a U.S. citizen or resident living abroad and working for yourself — whether freelancing, consulting, or running your own business — you may still be subject to U.S. self-employment tax — unless you’re covered by a totalization agreement and can prove you’re contributing to a foreign system.
This guide explains:
- What self-employment tax is
- When it applies to expats
- How to avoid being taxed twice
- What documentation you need to claim an exemption
- Why this matters for both tax and retirement benefits
What Is Self-Employment Tax?
Self-employment tax covers your contributions to Social Security and Medicare — the same programs funded by FICA taxes for employees.
- Employees pay 7.65% (6.2% Social Security + 1.45% Medicare), and their employer pays the same.
- Self-employed individuals pay the full 15.3% themselves — both the employer and employee share.
- This is required under the Self-Employed Contributions Act (SECA).
It applies to net earnings from self-employment (after deductions) and is reported separately from your income tax.
Do Expats Still Owe U.S. Self-Employment Tax?
Often, yes. The U.S. taxes its citizens and residents on worldwide income, including self-employment income earned abroad.
If you earn $400 or more in net self-employment income in a year, you’re generally required to pay:
- 12.4% Social Security tax
- 2.9% Medicare tax
This applies in addition to income tax — unless you’re exempt under a totalization agreement.
The Foreign Earned Income Exclusion Doesn’t Eliminate SE Tax
Even if you qualify for the Foreign Earned Income Exclusion (FEIE) — which can exclude up to $130,000 of income in 2025 — it does not remove your obligation to pay self-employment tax.
Many expats are surprised to learn they still owe SE tax despite having zero income tax due. That’s because the Foreign Earned Income Exclusion only applies to income tax — not to self-employment tax. Self-employment tax is calculated on your full net business income, regardless of any exclusion.
How Self-Employment Tax Is Calculated
Self-employment tax is not calculated on your full net profit. Instead, it applies to 92.35% of your net business income.
Why? Because this adjustment approximates what an employer would deduct as their share of Social Security and Medicare taxes. In other words, it puts self-employed individuals on a more equal footing with employees, who only pay half of their FICA taxes while their employer covers the rest.
Example:
- Net profit: $100,000
- SE tax base: $92,350
- SE tax = $92,350 × 15.3% = $14,130.55
Avoiding Double Taxation: Totalization Agreements
The U.S. has signed totalization agreements with 30 countries. These treaties prevent you from paying into both the U.S. and foreign social security systems at the same time.
To qualify:
- You must be subject to the foreign system under local law
- Your country must have a totalization agreement with the U.S.
- You may need to show proof — usually in the form of a Certificate of Coverage
You Need a Certificate of Coverage (CoC)
To claim the exemption, you’re generally expected to provide a Certificate of Coverage showing you’re contributing to the foreign system.
We’ve seen cases where the IRS requested the certificate after the exemption was claimed. While not always enforced, we recommend requesting the CoC whenever possible to avoid issues.
How to Request a Certificate of Coverage
- If you’re self-employed: Request the CoC from the foreign social security authority (see links below).
- If you’re temporarily assigned abroad by a U.S. company: Your employer should apply for the CoC to keep you covered under the U.S. system.
- If you’re permanently living and working abroad under a local contract: You’re likely already subject to the foreign system and typically do not need a CoC.
Useful links:
- UK: ssa.gov – UK
- Canada: ssa.gov – Canada
- Germany: ssa.gov – Germany
- All countries: ssa.gov – Overview
Countries with U.S. Totalization Agreements
| Argentina | Austria | Belgium | Brazil | Canada |
| Chile | Czech Rep. | Denmark | Finland | France |
| Germany | Greece | Hungary | Iceland | Ireland |
| Italy | Japan | Luxembourg | Netherlands | Norway |
| Poland | Portugal | Slovakia | Slovenia | South Korea |
| Spain | Sweden | Switzerland | UK | Uruguay |
Real-World Example: Self-Employment Tax Calculations
| Detail | Example 1 (FEIE only, Single Filer) | Example 2 (FEIE + FTC, Single Filer) |
|---|---|---|
| Net Business Profit | $130,000 | $239,500 |
| FEIE Claimed | $130,000 | $130,000 |
| Remaining Income | $0 | $109,500 |
| U.S. Income Tax | $0 (excluded) | $0 (offset by Foreign Tax Credits) |
| SE Tax Base (92.35%) | $120,055 | $221,167 |
| Social Security Tax (12.4%) | $14,886.82 | $21,836.40 |
| Medicare Tax (2.9%) | $3,481.60 | $6,414.17 |
| Total SE Tax | $18,368.42 | $28,250.57 |
| Additional Medicare Tax (0.9%)¹ | – | $355.50 |
¹ Applies to income over $200,000 for single filers. More at IRS Topic No. 560
Can You Deduct SE Tax?
Yes — you can deduct 50% of your self-employment tax when calculating your adjusted gross income. This reduces your taxable income but doesn’t lower the SE tax itself.
Summary: When Does SE Tax Apply?
| Scenario | U.S. SE Tax Owed? |
|---|---|
| U.S. expat in country with no treaty | Yes |
| In treaty country, covered by foreign system with CoC | No |
| In treaty country, not covered or no proof of coverage | Yes — unless you can prove foreign coverage |
| Nonresident alien | No — SE tax doesn’t apply |
Final Thoughts
Just because you live abroad doesn’t mean you’re exempt from U.S. self-employment tax. While income tax may be eliminated by the FEIE or Foreign Tax Credit, SE tax is a separate liability — and it adds up quickly.
- Check whether your country has a totalization agreement
- Request a Certificate of Coverage if eligible
- Don’t assume you’re exempt — the IRS may request proof
Start here: ssa.gov – Totalization Agreements