What is Self-Employment Tax Abroad?
The 15.3% Social Security and Medicare tax that self-employed US citizens owe even when living and working outside the United States.
Definition
US citizens and resident aliens who are self-employed abroad generally must pay US self-employment tax (15.3%) on their net self-employment income, even if they qualify for the Foreign Earned Income Exclusion. The FEIE only excludes income from federal income tax, not from self-employment tax. Totalization Agreements with certain countries may provide relief by allowing the self-employed individual to pay only into the host country's social insurance system.
Who Needs to Know This?
Self-employed US citizens and resident aliens working abroad, including freelancers, consultants, and business owners operating in foreign countries.
Key Deadline
Filed with annual tax return on Schedule SE; quarterly estimated payments recommended
Potential Penalties
Underpayment penalties for insufficient estimated tax payments
Related Forms
Common Mistakes to Avoid
- 1Assuming FEIE also excludes income from self-employment tax (it doesn't)
- 2Not making quarterly estimated payments for SE tax
- 3Not checking if a Totalization Agreement provides relief
- 4Double-paying into both US and foreign social insurance systems
Related Terms
Harsh Agarwal, EA · IRS Enrolled Agent
Reviewed for accuracy by Zenith Financial Advisors
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