Contact UsHow much self-employment tax must be paid by a self-employed individual whose entire earned income was excluded from US Federal Income tax?
Forms 2555 and 2555-EZ allow a US Citizen or Green Card Holder living overseas to exclude part, if not all, of their overseas earned income if they qualify on the basis of time outside of the US or residency in a foreign country. Since the US taxes its citizens, etc., on worldwide income, the elimination of part or all of their earned income, doesn't help them exclude unearned income. Self-employment taxes are used to fund US Social Security and US Medicare. Obviously, we must restrict the answer to those locations not having tax treaties with the US relating to US Social Security and Medicate taxes.
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Tax Professional Answers
John Stancil
The foreign earned income exclusion applies only to income tax. Any self-employment earnings are subject to the self-employment tax unless the host country requires him to pay into its "social security" system, and excluded by treaty.
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366 weeks ago