Self-Employed Expats

Self-Employed Expats
Everyone finds it difficult to understand how to file taxes. Self-employed people are no different. We ensure you understand how to file taxes if self employed, accurate reporting of foreign self-employment income, tax deductions, and IRS compliance for stress-free filing.
Guide for Expats
Living abroad as a self-employed expat brings many advantages; flexibility, new opportunities, and often a lower cost of living. However, filing taxes self-employed expat can be complicated due to U.S. tax laws requiring citizens to report worldwide income. Whether you’re a freelancer, consultant, contractor, or small business owner, it’s essential to understand how to report foreign self-employment income, self-employment tax on foreign earned income, and available tax benefits.
Key Takeaways:
Do Self-Employed Expats Have to Pay U.S. Taxes?
Yes. U.S. citizens and green card holders must report all income, no matter where they live. This includes foreign self-employment income earned overseas.
If you’re self-employed and earning $400 or more per year, you must file a U.S. tax return (Form 1040) and pay self-employment tax on foreign earned income to cover Social Security and Medicare contributions. Even if you pay taxes in your country of residence, you may still owe U.S. taxes.
Key points:
✅ The U.S. taxes worldwide income, including foreign self-employment income.
✅ If you earn $400+ from self-employment, you must file a tax return.
✅ Self-employment tax is 15.3% and covers Social Security & Medicare.
✅ Paying self-employment tax may still be required even if taxed abroad.
Understanding U.S. Self-Employment Tax for Expats
Unlike salaried employees who have Social Security and Medicare taxes withheld from their paycheck, self-employed individuals must pay these taxes directly. This is known as self-employment tax on foreign earned income and is calculated on Schedule SE (Form 1040).
For 2025, the self-employment tax rate remains at 15.3%:
- 12.4% for Social Security (on income up to $168,600)
- 2.9% for Medicare (on all earnings)
- If your income exceeds $200,000 ($250,000 for married couples filing jointly), you may be subject to an additional Medicare tax of 0.9%.
Even if you qualify for the Foreign Earned Income Exclusion (FEIE), your self-employment tax on foreign earned income is still due unless exempt under a Totalization Agreement.
How to Report Foreign Self-Employment Income
As a self-employed expat, you must report all business income and expenses to the IRS. This is done using several key tax forms:
Tax Form | Purpose |
Form 1040 | Standard U.S. tax return |
Schedule C | Reports business income & deductions |
Schedule SE | Calculates self-employment tax on foreign earned income |
Form 2555 | Claims Foreign Earned Income Exclusion (FEIE) |
Form 1116 | Claims Foreign Tax Credit (FTC) |
FBAR (FinCEN 114) | Reports foreign self-employment income bank accounts (if over $10,000) |
What Tax Benefits Can Self-Employed Expats Claim?
Self-employed expats may be able to reduce or eliminate their U.S. tax burden through several tax benefits:
✅ Foreign Earned Income Exclusion (FEIE) – Form 2555
- Allows expats to exclude up to $120,000 (2025 estimate) from U.S. taxes.
- To qualify, you must meet either:
- Physical Presence Test (330+ days abroad).
- Bona Fide Residence Test (establish a permanent home abroad).
✅ Foreign Tax Credit (FTC) – Form 1116
- If you pay foreign income taxes, you may receive a self-employment tax credit to offset double taxation.
- Useful if you live in a high-tax country where local taxes exceed U.S. rates.
✅ Deducting Business Expenses – Schedule C
Self-employed expats can deduct business expenses such as:
- Home office expenses
- Travel & accommodation costs
- Internet & software subscriptions
- Professional fees & memberships
Do Self-Employed Expats Have to Pay State Taxes?
Possibly. Some U.S. states require expats to file state taxes, especially if they maintain residency there.
- No State Taxes Required: If you’re a resident of a tax-free state (e.g., Florida, Texas, Nevada).
- State Taxes May Apply: If you keep a mailing address, driver’s license, or voter registration in high-tax states (e.g., California, New York).
Tip: To avoid unnecessary tax obligations, sever state ties before moving abroad.
Social Security for Self-Employed Expats
Will you still receive Social Security benefits if you work abroad? Yes, as long as you continue paying self-employment tax.
However, if you live in a country with a Totalization Agreement, you may not have to pay both U.S. and foreign Social Security taxes. The U.S. has agreements with 26+ countries, including:
✅ United Kingdom
✅ Canada
✅ Germany
✅ France
✅ Australia
If your country has an agreement, you may only have to contribute to one country’s Social Security system instead of both.
How to File Taxes: Self-Employed as a U.S. Expat
✅ Step 1: Keep detailed records of all income and expenses.
✅ Step 2: Determine if you qualify for FEIE or FTC.
✅ Step 3: File Form 1040, Schedule C, and Schedule SE.
✅ Step 4: Report foreign bank accounts if required (FBAR).
✅ Step 5: Use IRS-approved tax software or consult an expat tax expert.
What Happens If You Haven’t Filed Your Taxes?
If you haven’t filed U.S. taxes for past years, you may qualify for the IRS Streamlined Filing Compliance Procedures, which allow delinquent filers to catch up without penalties.
To qualify, you must:
- Submit 3 years of late tax returns.
- Submit 6 years of FBAR reports (if required).
- Certify that your failure to file was non-willful.
Filing taxes as a self-employed expat may seem overwhelming, but with the right tax strategies, you can minimize your tax burden and stay compliant. Need help? Get expert tax support today!
Stay Compliant and Maximize Tax Savings as a U.S. Expat
Managing taxes as a U.S. citizen abroad doesn’t have to be complicated. Our team ensures compliance while optimizing tax benefits.
Stay Compliant and Maximize Tax Savings as a U.S. Expat
Managing taxes as a U.S. citizen abroad doesn’t have to be complicated. Our team ensures compliance while optimizing tax benefits.
Why Choose us
Expert Tax Solutions Tailored for U.S. Expats
We provide a wide range of U.S. expat tax services tailored to your needs. From filing late returns to small business taxes, our team ensures accuracy and compliance every step of the way.
US Citizens Living Abroad
We handle U.S. expat tax obligations, including income reporting, deductions, and credits, ensuring compliance while minimizing tax liabilities.
Digital Nomads
Remote workers navigating multiple tax jurisdictions get expert guidance on U.S. tax laws, foreign exclusions, and reporting requirements.
Accidental Americans
Born in the U.S. but living abroad? We help with IRS compliance, tax returns, and renunciation considerations if needed.
Foreign Business Owners
U.S. citizens owning businesses abroad receive strategic tax planning, foreign income reporting, and business tax compliance solutions.
Self-Employed Expats
Freelancers and business owners get tax-efficient strategies for reporting income, deductions, and self-employment tax obligations.
Foreign Bank Account Holders
We ensure compliance with FBAR and FATCA reporting for expats with foreign bank accounts, investments, or financial assets.
US Citizens Considering Moving Abroad
Tax planning services help you prepare for tax residency changes, foreign income reporting, and U.S. tax obligations before relocating.
Dual Citizens
We guide dual citizens through IRS tax filing, foreign tax credits, and treaty benefits to prevent double taxation.
Retirees Abroad
U.S. retirees overseas receive expert advice on Social Security benefits, retirement account taxation, and foreign income reporting.
Foreign Property Owners
Own real estate overseas? We help with rental income reporting, capital gains taxes, and IRS compliance.
American Teachers Abroad
Educators living overseas benefit from tailored tax strategies, exclusions, and compliance with U.S. and foreign tax laws.
US Expats Moving Back to America
Returning expats receive tax guidance on repatriation, foreign asset reporting, and tax-efficient transitions to the U.S. tax system.
Educators Living Abroad / Overseas
Teachers and academic professionals abroad receive expert tax solutions, ensuring compliance with U.S. tax laws while maximizing benefits.