Skip to content

Self-Employment Taxes

If it is certain you work for yourself and are in control of the services you perform, then you are self-employed and income you receive from this specific work is subject to pay self-employment tax. If you are not sure if you are self-employed, check out this post here.

Self-employment tax is essentially Social Security and Medicare taxes. It does not include any other taxes you as a self-employed individual may be required to file.

Social Security taxes help pay for retirement, disability and survivorship. Medicare helps pay for health insurance and benefits you as a US expat can receive when you become a senior.

Filing Taxes as a Self-Employed Person

The threshold to file taxes is very low. As a self-employed person, you need to file if your net earnings of the year were at least $400. You’ll need to file Schedule C, a form that reports to the IRS your profits and/or losses from your company.

You are both employer and employee and need to pay tax separately after calculating your net profit. The process is similar to what wage earners in the US do to withhold their pay.

To file your self-employment taxes, use Schedule SE on Form 1040 or 1040-SR. Our app also has these forms, which you can easily and online in no time. You can also deduct any employer-equivalent portion from your self-employment tax. 

Foreign Corporation

If you own a foreign corporation, you’ll need to fill out Form 5471. If you are involved in a foreign partnership, you’ll have to file Form 8865.

These forms can be quite complex and incur high penalties. They are offered as additional services to our DIY Tax Software.

Paying for Social Security and Medicare Taxes

For the year 2020, the IRS states that US expats who are self-employed will be taxed at 12.4% on $137,700 of earnings, that can be offset through tax provisions. Then, 2.9% is an additional tax for all earnings to take for the Medicare portion. The amount increased to $142,800 for 2021. Therefore, we suggest you budget for about 15.3% of self-employment tax from your net profit.

You can calculate your net profit through Schedule C, and then continue with Schedule SE (or use our app!).

Other Important Info

Your host country that you live in as an American abroad has their own laws regarding social security, health and other fees. It’s imperative you check if your country is on the tax treaty Totalization Agreement list. You’ll have to see what other legal measures you need to take to make sure your foreign taxes are properly handled.

Are you subject to US self-employment tax?

  • If living in Totalization treaty country, self-employed  AND you are registered in that social security system = NO
  • If living in a Non-Totalization country and self-employed = YES

Reduce your Self-Employment Taxes

It’s possible to reduce your self-employment taxes through deducting all your business expenses. How to do it? Many different ways, for example:

  • For business meetings and events you commute to
  • Section 179 deduction for specific fixed assets from your business
  • Home office expenses

…and more. Our software includes all common self-employment business expense categories.

Share Post

Posted in . Tags:

expat tax guide intro illustration

Expat Tax Guide

Enjoy our ultimate expat guide that will help you get and stay tax compliant!

Search Tax Guide

Tax Guide Topics

You may also like

2021 Stimulus Checks for Americans Abroad

The first US stimulus checks for Americans abroad have been sent out in March 2020. Then, in 2021 a second check was released in January, and the third round happened…

Unfiled Tax Returns

Penalties for Not Filing Penalties can get serious if you are an American living abroad, and have unfiled tax returns – failing to file on time. For US expats it’s…

Retiree Support for Americans Abroad

Retired or Planning to Retire? If you are planning to retire, you need to know that Americans, both in the US and abroad can gain retiree support benefits from the…

Renouncing US Citizenship

Renouncing US citizenship is possible as an American abroad, though not recommended. You’ll need to be tax compliant for five years, sign an oath, pay a large exit fee, and…

FATCA and Foreign Bank Account Information

Every foreign bank account you open as an American abroad means you are connected to the FATCA law. This law allows the US Department of Treasury to access your bank…

Save Even More Money with US Taxes

If you have a family, you can save money with US taxes through the child tax credit and foreign housing exclusion. The child tax credit allows you to get refundable…

Only our best expat tax tips to your inbox.

Thousands of users in over 170 countries.

See why people from around the world love us.

Featured In

The leading, and most affordable, tax filing platform for American expats.

Yahoo! Finance

Winning Choice

Best Tax Software for Expatriates in 2021

Scroll To Top