Self-Employed and Digital Nomad Expat Taxes Explained

It's easy to get confused by the complexity of US expat taxes for freelancers and global nomads. That's where we can help. Expatfile takes you step by step through self-employed expat tax filing and helps you maximize the exclusions and deductions available for Americans abroad.

• Expat deduction identification
• State tax complexity help
• Payment reminders
• Expert support access
• FEIE and self-employment tax calculations

Many self-employed expats, or digital nomads, have a common misconception that their self-employment income is tax-free in the US. While this is partially true, as self employed expats can still qualify for the same expat tax breaks many other expats do – they still need to be aware of the “self-employment tax”.

This article gives you an overview of expat taxes for the self-employed and explains how to get the most expat tax breaks available as a digital nomad.

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What is considered as self-employed?

Basically, you’re considered self-employed if you work for yourself, whether that’s on a part-time or full-time basis. Many expats organize their self-employment businesses through a US limited liability company (LLC). Unless you have elected to treat your LLC as a corporation, you are still considered self-employed by the IRS.

Any income you earn while self-employed is considered “self-employment income”.

How is self-employment income taxed as an expat?

Self-employed expats and digital nomads are subject to the same tax rules as any other American living abroad, which requires all U.S. citizens to file and report their worldwide income, no matter where they live.

This also means self-employed expats are subject to the same self-employment taxes as US residents, also known as the “self-employment tax”.

In other words, a self-employed expat or digital nomad will basically be subject to two forms of US taxation:

• Regular income tax
• Self-employment tax

This distinction is important, because the common expat tax breaks are typically only available to use against the regular income tax.

What is the self-employment tax?

Self-employment tax refers to additional tax (over and above regular income taxes) applied to self-employment income, and specifically refers to the combination of Social Security and Medicare tax.

The self-employment tax rate is 15.3%. The rate consists of two parts:

• 12.4% for Social Security – applied only on the first $176,100 (2025) of self employment income
• 2.9% for Medicare

What expat tax breaks are available for self-employment income?

For the regular income tax, self-employed expats can still take advantage of the same expat tax breaks available to any other American living abroad, which means that the Foreign Tax Credit and Foreign Earned Income Exclusion are both available for self-employed expats and digital nomads!

Foreign Tax Credit - The Foreign Tax Credit, or FTC, is a non-refundable credit that will reduce your U.S. tax liability dollar-for-dollar for taxes you paid to a foreign country. Simply put, if you paid taxes to a foreign country, you can claim these foreign taxes as a credit against your U.S. taxes. If you paid mor taxes to a foreign country, than usually you will owe no U.S. tax on that income.
Foreign Earned Income Exclusion - The Foreign Earned Income Exclusion, or FEIE, is one of the tax breaks available for U.S. expats to eliminate or reduce any U.S. tax liability on income earned from living and working abroad.

For the self-employment tax, unfortunately the Foreign Tax Credit or Foreign Earned Income Exclusion cannot be used to reduce what you would owe for self employment tax. However, if you are paying foreign social security or equivalent tax in the foreign country you reside in, you may not have to pay US self employment tax if the country you are paying foreign social security tax to has a totalization agreement with the US.

If the country you are paying foreign social security tax does have a totalization agreement with the US, then you do not need to pay US self-employment tax, but you will need to obtain a “certificate of coverage” from the foreign government, and keep it in your records!

Use Expatfile to report your self-employment income

ExpatFile is designed to reduce your time filing taxes while making sure you are able to claim all the best expat tax breaks available, and this includes helping out self-employed expats and digital nomads too!

Expatfile automatically will determine if the foreign earned income exclusion or the foreign tax credit is the best choice for you, and in addition, will help you claim exemption from self-employment tax if you live in a country that has a totalization agreement with the US.

Do I Need to Pay Quarterly Estimated Tax as a Self-Employed Expat?

Yes, and if you expect to owe $1,000 or more in taxes for the year, you are required to make quarterly estimated tax payments to the IRS regardless of whether you are abroad or not. Self-employment tax is not capped by Foreign Earned Income Exclusion; however, qualifying income may still be subject to taxation. The April 15, June 15, September 15, and January 15 quarterly due dates remain the same, so budget in advance with Form 1040-ES.

What Is a Totalization Agreement and How Will It Affect My Tax?

A Totalization Agreement is an international agreement that prevents double taxing of Social Security taxes. If you're contributing to the social security system of the country you reside in, you can be exempt from U.S. social security tax. You'll need to get a certificate of coverage from the social security agency of the foreign country you live in.

Can I Still Claim Expat Tax Deductions if I Am Self-Employed?

Self-employed expats can also deduct regular and usual business expenses like home office, internet and phone bills, software subscription costs, co-working space, business travel, and equipment. Along with the Foreign Earned Income Exclusion, these deductions can have a significant impact on self-employed and digital nomad taxes.

Do I Still Owe State Taxes as a Foreign Digital Nomad?

This depends on your prior status and any actions taken to break residency. Aggressive residency regulations apply in some states like California, New York, and Virginia. To end state residency, you will need to close your state bank accounts, dispose of any property, return your driver's license, and terminate your voter registration. Having once been a resident of a no-income-tax state like Florida or Texas prior to going abroad may simplify your case.

What Is Foreign Earned Income Exclusion in the Context of Self-Employment Income?

Foreign Earned Income Exclusion allows qualifying expats to exclude as much as $130,000 (for tax year 2025) from federal taxes, but the exclusion does not apply to self-employment tax for expats. You are still required to pay the full 15.3% self-employment tax on your net earnings regardless of FEIE.

How Tax Filing Varies Under Schedule C Compared to an LLC?

From the perspective of federal taxation, a single-member LLC is taxed the same as a sole proprietorship except for taking on S-Corporation status. Both report on Schedule C and are liable for self-employment tax. For self-employed expat tax filing, taking on S-Corporation status will reduce self-employment taxes by allowing you to allocate income as salary and distributions, though this comes at the expense of further administrative hassle that is only typically worth it to the more successful.

Ready to Simplify Your Expat Tax Filing?

Expatfile's user-friendly platform is designed for self-employed Americans living overseas. It guides you through the complexities of expat taxes and helps you claim all your deductions and credits.

Try it for free today and see how easy tax filing can be when you have the right tools! Try Expatfile Free

This article was reviewed by Prasanth, IRS Enrolled Agent

Updated: January 8, 2026