Self-employment tax abroad: why it applies, and when it doesn't
If you work for yourself, the U.S. charges self-employment tax wherever you live, and the foreign earned income exclusion doesn't touch it. That surprises a lot of freelancers and consultants abroad. A social security agreement between the U.S. and your country can be the way out.
The short version
- Self-employed U.S. citizens owe U.S. self-employment tax wherever they live, once net earnings reach $400 for the year.
- It's 15.3%: 12.4% for Social Security on earnings up to $184,500 for 2026, plus 2.9% for Medicare.
- The foreign earned income exclusion and the foreign tax credit don't reduce it.
- A social security agreement with your country can stop you paying into both systems.
1How it works
Self-employment tax is the self-employed version of Social Security and Medicare tax. It's 12.4% for Social Security on net earnings up to $184,500 for 2026 ($176,100 for 2025), plus 2.9% for Medicare with no cap, and an extra 0.9% Medicare tax on higher incomes. It applies once your net self-employment earnings reach $400 for the year, and it's worked out on 92.35% of your net profit.
The upside: it builds U.S. Social Security credits toward your own benefit.
2Why the exclusion doesn't help
The foreign earned income exclusion only lowers income tax, and the foreign tax credit can't be used against self-employment tax either. So a freelancer abroad can owe self-employment tax even when their U.S. income tax is zero.
No income tax doesn't mean no U.S. tax.
3Social security agreements
The U.S. has social security agreements, also called totalization agreements, with 31 countries. Some of them assign self-employed people to the system of the country they live in; others work differently, so the rules for your country matter. Without an agreement, you can end up paying into both systems.
U.S. self-employment tax and your country's social security can both apply.
The agreement decides which one, and a certificate of coverage from that country proves it.
To stop paying U.S. self-employment tax under an agreement, you need a certificate of coverage from the country whose system covers you. We use it to claim the exemption on your return.
4Which countries have one
Countries we cover with an agreement: Australia, Austria, Belgium, Brazil, Canada, Chile, Denmark, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, Poland, Portugal, South Korea, Spain, Sweden, Switzerland and the United Kingdom.
Other countries with an agreement: the Czech Republic, Finland, Hungary, Iceland, Luxembourg, Romania (from September 1, 2026), the Slovak Republic, Slovenia and Uruguay.
Countries we cover with no agreement: Argentina, China, Colombia, Costa Rica, Croatia, Cyprus, the Dominican Republic, Ecuador, Hong Kong, India, Israel, Malaysia, Malta, Mexico, New Zealand, Panama, the Philippines, Saudi Arabia, Singapore, South Africa, Taiwan, Thailand, the UAE and Vietnam. If you're self-employed in one of these, U.S. self-employment tax and any local contributions can both apply.
5If you work for a U.S. company
Employees of U.S. companies working abroad generally still pay U.S. Social Security and Medicare tax (FICA). In agreement countries, a temporary assignment, usually up to five years, keeps you in the U.S. system only; otherwise the agreement usually covers you where you work. Working for a local employer usually means local contributions only.
Self-employed abroad and behind on U.S. returns? Any self-employment tax due goes on the catch-up returns, for example under the Streamlined Foreign Offshore Procedures, which waive the penalties if you qualify. See IRS tax amnesty options for expats.
Common questions
Is paying self-employment tax all bad?
No. It builds U.S. Social Security credits toward your own benefit, which can matter if you plan to retire on it.
I'm self-employed in a country without an agreement. What can I do?
Self-employment tax still applies. Working through a company can change the picture, but it brings its own forms, like Form 5471. We look at the whole picture before you change anything.
Self-employed abroad? Let's get it right.
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Reviewed by Lewis Grunfeld, CPA. General information, not advice for your specific situation.