Self-employment tax
Published on November 27, 2025
Published by
Table of Contents
For the 2025 tax year, you will be required to report and pay self-employment tax if your earnings reach US$400 or more, including your foreign self-employment income.
What every self-employed American abroad should know
Self-employment tax covers your contributions to Social Security (12.4%) and Medicare (2.9%), totaling 15.3%. It’s what regular US employees see withheld from their paychecks, except that self-employed people pay both halves.
Here’s a quick look at the 2025 US self-employment tax rates and thresholds:
|
Key fact |
2025 figure |
|
Rate |
15.3% (12.4% Social Security + 2.9% Medicare) |
|
Wage base |
US$176,100 |
|
Threshold |
US$400 in net earnings |
|
Applies to |
US citizens or residents with self-employment income |
|
Main forms |
Schedule C + Schedule SE (Form 1040) |
Even if you use the Foreign Earned Income Exclusion (Form 2555) to exclude part of your income from US income tax, you’ll still owe self-employment tax. The two are completely separate; FEIE affects income tax, not Social Security or Medicare contributions.
What counts as self-employment for US expats
If you decide what services you offer, how you deliver them, and who you work with, you’re likely self-employed. That includes:
- Freelancers or contractors who invoice clients directly
- Consultants offering professional services
- Digital nomads earning remotely while traveling
- Online business owners managing their own e-commerce or content platforms
Employees, on the other hand, share the tax burden with their employer (7.65% each). But if you’re self-employed, you wear both hats, which means you’re the boss and the employee, so you owe the complete 15.3%.
To make things fair, the IRS lets you claim the “employer half” (7.65%) as a business deduction. It doesn’t reduce your self-employment tax directly, but it lowers your adjusted gross income (AGI), which can reduce how much regular income tax you owe.
For example:
If you earn US$80,000 freelancing from London, you’ll first multiply that by 0.9235, leaving about US$73,880 subject to the 15.3% self-employment tax—roughly US$9,430 owed.
You can then deduct half (about US$4,715) on Schedule 1 to lower your adjusted gross income.
So yes, you shoulder the full tax rate, but that deduction helps even the playing field. Let’s look at how the overall self-employment tax system works in 2025.
2025 self-employment tax rates and limits
Self-employment tax mimics the US payroll system, which funds Social Security and Medicare. The rates for 2025 haven’t changed, but the Social Security wage base increased to US$176,100—up from US$168,600 in 2024. That means you’ll contribute Social Security tax on slightly more income before the cap kicks in.
|
Component |
Rate |
2025 limit |
Applies to |
|
Social Security (OASDI) |
12.4% |
US$176,100 |
Net earnings up to US$176,100 |
|
Medicare (HI) |
2.9% |
None |
All net earnings |
|
Additional Medicare Tax |
0.9% |
Over US$200K (single) / US$250K (joint) |
High earners only |
To figure out your self-employment tax, start with your net profit, then multiply it by 0.9235. The IRS uses this step to remove the “employer-equivalent” portion before applying the 15.3% tax rate.
Example:
US$60,000 × 0.9235 × 15.3% = US$8,478
The Social Security portion stops once you hit US$176,100, but Medicare continues indefinitely and adds an extra 0.9% once your income passes the high-earner threshold.
Have self-employment income? Contact us today to manage your tax obligations.
Filing requirements for self-employed expats
If you earn US$400 or more in net self-employment income, you must file a US tax return, even if you live entirely outside the country. Here’s what that looks like:
- Schedule C (Form 1040): lists your business income and expenses.
- Schedule SE (Form 1040): calculates your self-employment tax.
- Form 1040 or 1040-SR: your main tax return.
You’ll also deduct half of your self-employment tax on Schedule 1 (Form 1040), line 15.
The self-employment tax itself is reported on Schedule 2 (Form 1040), line 4, and then carried over to your main Form 1040.
If you run your business through a foreign corporation or partnership, it gets more complex because the IRS wants visibility into overseas business structures. You might need to report:
Important! Missing these forms can cost thousands in penalties, so getting help from a CPA who understands international filings is a wise move.
Totalization agreements and when you’re exempt
There’s one major exception: some expats don’t owe US self-employment tax at all, thanks to international totalization agreements.
The US has totalization agreements with several countries to prevent double social security coverage. If your host country has one and you pay into that country’s system, you’re exempt from US self-employment tax. If not, you’re stuck paying both.
The following countries have social security (totalization) agreements with the US as of the 2025 tax year. If you’re contributing to one of these systems, you may be exempt from US self-employment tax.
- Australia
- Austria
- Belgium
- Brazil
- Canada
- Chile
- Czech Republic
- Denmark
- Finland
- France
- Germany
- Greece
- Hungary
- Iceland
- Ireland
- Italy
- Japan
- Luxembourg
- Netherlands
- Norway
- Poland
- Portugal
- Slovak Republic
- Slovenia
- South Korea
- Spain
- Sweden
- Switzerland
- United Kingdom
- Uruguay
How to pay and plan ahead
Unlike traditional employees, no one withholds taxes for you. You’re both the boss and the payroll department, so it’s your job to pay the IRS throughout the year.
Most self-employed expats use quarterly estimated tax payments via Form 1040-ES. The 2025 due dates are:
- April 15, 2025
- June 16, 2025 (moved because June 15 is a Sunday)
- September 15, 2025
- January 15, 2026
If you live abroad full-time, you get an automatic two-month extension to file and pay until June 16, 2025 (since the 15th is a Sunday).
Many expats set aside 25-30% of each payment for combined income and self-employment tax. A good rule of thumb is to treat tax savings as a business expense.
Keep in mind: Interest starts accruing after April 15 on any unpaid balance, even though you have until June 16, 2025 to file without penalties. So filing later doesn’t mean delaying payment interest-free.
FAQs
-
If I pay into a foreign pension or social insurance plan, do I still owe US self-employment tax?
Usually, yes—unless your country has a totalization agreement with the US and you’re officially contributing to that country’s system. The IRS looks for a Certificate of Coverage as proof. Without one, you’re still liable for the full 15.3% US self-employment tax, even if you’re paying into a foreign plan.
-
What happens if I don’t pay self-employment tax as an expat?
-
How do self-employment taxes interact with the Foreign Earned Income Exclusion (FEIE)?
-
Is there any scenario where an expat freelancer truly pays no US self-employment tax?
Prefer to talk it through? Schedule your free callback today.
Spread the word. Please share… 👉
