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Self-employment tax for US expats

Many US expats are surprised to learn that even if they reduce their income tax using exclusions or credits, they may still owe self-employment tax.

What is self-employment tax?

Self-employment tax covers Social Security and Medicare contributions for freelancers, consultants, and business owners.

Do expats have to pay it?

In most cases, yes. The Foreign Earned Income Exclusion does not eliminate self-employment tax.

Are there exceptions?

Some expats may avoid self-employment tax if they are covered under a totalization agreement between the US and their country of residence.

Why this matters

Many expats think they owe nothing, only to discover they still have a tax liability due to self-employment tax.

What should you do next?