What is a Totalization Agreement?

A Totalization Agreement is a bilateral agreement between the United States and another country that coordinates social security coverage and taxation for workers who divide their careers between the two countries. The US currently has Totalization Agreements with approximately 30 countries, including Canada, the United Kingdom, Germany, Australia, Japan, South Korea, and most Western European nations.

Totalization Agreements serve two primary purposes. First, they eliminate dual social security taxation by establishing clear rules for which country's system applies. Without an agreement, a US citizen working in another country might be required to pay social security taxes to both countries simultaneously. Under a Totalization Agreement, you generally pay into only one system — typically the country where you are currently working.

Second, they allow workers to combine (totalize) their work credits from both countries to qualify for benefits. For example, if you worked 8 years in the US and 5 years in Canada, you might not qualify for benefits in either country based on domestic rules alone. Under the Totalization Agreement, your credits can be combined to help you qualify in one or both countries.

For self-employed expats, Totalization Agreements are particularly important. Without an agreement, you would owe US self-employment tax (15.3%) even while living abroad, in addition to any social security contributions in your country of residence. With an agreement, you pay only into the system of your country of residence.

To obtain an exemption from US social security tax under a Totalization Agreement, you need a Certificate of Coverage from the social security agency of your country of residence. This certificate proves you are covered by that country's system and should be attached to your US tax return.

If you work in a country without a Totalization Agreement, you may face dual social security taxation, and the FEIE does not provide relief from self-employment tax. In such cases, careful planning is needed to minimize the burden.