Totalization Agreements for US Expats Explained

Americans living abroad must file US taxes, even on income earned overseas. This creates the very real risk of double taxation. For those working abroad, it often means also paying into a foreign Social Security system.

While credits, deductions, and Tax treaties can reduce the risk of being taxed twice on income, they don’t cover Social Security. That’s where Totalization Agreements step in. In this article, we’ll outline Totalization Agreements, who they help, and how they coordinate Social Security for US expats.

In this article, we’ll define Totalization Treaties, explain who benefits from them, and look at ways these treaties can help you avoid paying unnecessary taxes and ensure compliance with international tax laws and agreements.

What Is a Totalization Agreement?

Totalization agreements, also called Social Security agreements, are international treaties between the United States and another country that determine who has the right to collect Social Security contributions. Their purpose is to prevent Americans abroad from having to pay into both the US and their host country’s systems at the same time.

These treaties also help fill gaps for US expats who split their careers between countries by allowing work credits earned in one country to count toward eligibility in the other.

Example: Suppose an American is sent by their US employer to work in Spain for several years. Without an agreement, they could owe Social Security to both countries. With the US–Spain totalization agreement, however, only one system applies, avoiding double contributions.

Not every country has a totalization agreement with the US, and even when one exists, some types of income, such as self-employment, may fall outside its scope. In these cases, expats could still face paying into both systems.

The United States has Totalization Treaties with 30 countries across the world:

Australia	Germany	Poland
Austria	Greece	Portugal
Belgium	Hungary	Slovakia
Brazil	Iceland	Slovenia
Canada	Ireland	South Korea
Chile	Italy	Spain
Czech Republic	Japan	Sweden
Denmark	Luxembourg	Switzerland
Finland	The Netherlands	United Kingdom
France	Norway	Uruguay

For specific treaty terms regarding the country where you reside, consult the Social Security Administration’s complete list of US International Social Security Agreements.

Who Benefits from Totalization Treaties?

Totalization agreements benefit expat employees and self-employed individuals by helping them avoid double Social Security contributions. They also help those who have worked in both the US and another country combine credits to qualify for retirement benefits.

Expat Employees

For Americans working abroad, totalization agreements determine whether you contribute to the US or your host country’s Social Security system. This ensures you pay into only one system at a time. Key rules often include:

• If a US employer assigns you overseas for less than five years, you generally keep paying into the US system.
• If the assignment lasts more than five years, you switch to paying into the host country’s system.
• If you work for a foreign employer, you typically contribute only to the host country’s system.

Self-Employed Expats

Self-employed Americans abroad can be especially affected, since US law normally requires you to pay self-employment tax on worldwide net earnings, even if you earn as little as $400 in net profit in a year. Totalization agreements help prevent double contributions, but the rules vary depending on:

• Where your income is earned Some agreements decide coverage based on whether your work ties back to the US or your host country.
• Type and duration of your work Employees often fall under the 5-year assignment rule, while self-employed expats are usually covered where they physically work.
• Your citizenship or immigration status Most agreements apply to US citizens and citizens of the partner country; third-country nationals may not be covered. (For example, the US–Italy agreement only allows dual US–Italian citizens to opt into the Italian system.)
• Whether you’re on a temporary assignment or settled abroad Short-term postings often stay under the US system, while long-term stays usually shift to the host country.

Combining Work Credits

Many Americans split their careers between the US and another country, building Social Security credits in both places. On their own, these credits may not be enough to qualify for benefits in either system. Totalization agreements allow you to combine credits to meet eligibility thresholds for benefits in either country, ensuring you don’t lose out on retirement benefits you’ve earned across borders.

Example: Imagine John spends part of his career in the US and part in Spain. He earns 32 quarters (about 8 years) of US Social Security credits, short of the 40 required to qualify for US benefits. He also worked for several years in Spain, but not enough to qualify for Spanish benefits either. Thanks to the US–Spain totalization agreement, his US credits can be added to his Spanish record for eligibility purposes.

The important point is that John’s US credits are not transferred or reduced they still count toward US benefits. Instead, Spain simply recognizes them so he can meet its minimum threshold as well. This way, John can qualify for retirement benefits from both countries, based on the time he worked in each.

What’s the Difference Between a Tax Treaty and a Totalization Agreement?

While totalization agreements and tax treaties help prevent expats from double taxation, the two have key differences. Let’s break it down:

• A tax treaty establishes which country has the right to tax particular types of income, including wages, investments, and pensions. Without a tax treaty in place, an expat may have to pay taxes on a single income to both the US and their host country.
• A totalization agreement specifically coordinates Social Security benefits between the two countries. This ensures you only contribute taxes to one country’s benefit programs. These agreements also allow retirees to combine work credits to qualify for retirement benefits.

While the US has income tax treaties with around 100 countries, it has totalization agreements with only 30. This means that even if your income is protected by a tax treaty, your Social Security contributions may still face double taxation unless your host country is on the much shorter list.

Depending on the circumstances and the treaties between the US and your host country, it is possible to benefit from both a tax treaty and a totalization agreement. That means you won’t be double taxed on your earned income or Social Security contributions. on both.

Am I Eligible for Totalization Agreement Benefits?

Whether or not you are eligible to benefit from a Totalization Agreement depends on specific criteria. These include whether you have dual nationality, your work history, whether you’re employed or self-employed, length of stay abroad, and the terms of the agreement with your host country and the United States.

Because each agreement has its own rules, you will usually need to request a Certificate of Coverage from the Social Security Administration or your host country’s Social Security authority. This certificate proves you are covered under one system, so you don’t have to contribute to both. In some cases, local authorities may accept other documents as evidence, but the certificate is the standard proof required under most agreements.

Questions About Totalization Agreements?

Totalization agreements can be complicated, the rules vary by country, and it’s not always clear which system you should be paying into or how your work credits will count toward retirement. The good news is, you don’t have to figure it out alone.

At MyExpatTaxes, our tax professionals and award-winning software make sure totalization agreements are applied correctly, avoiding double contributions whenever possible. We can help you get peace of mind for your taxes today, and for your retirement tomorrow.

FAQs: Totalization Agreements & Social Security for US Expats