Monday, January 14, 2013

Self-Employed US Expats

Home Sweet Studio
Home Office photo by geishaboy500
Today's post is US-centric again, I'm afraid. My apologies to all of my non-US readers.

According to one expat survey I've read, almost 25% of US expats (who responded to the survey) are self-employed. I find this number astonishingly high given that other countries don't hand out work permits for self-employed people, though the Dutch-American Friendship Treaty is an interesting counter-example. What would surprise me, however, is most expats abroad knowing about the self-employment tax. When most didn't know about the US's curious citizen-based taxation system, they would probably be astonished to find out that if they're living and working abroad, self-employed US expats still have to pay an extra 15.3% of their income to the US to cover Medicare and Social Security.

If you plan to return to the US at some point, this is fine. However, if you're a permanent expat like myself, this is particularly galling because you're required to pay for Medicare, but you're not allowed to use it. Additionally, if you collect a foreign pension, your Social Security benefit gets cut. Never mind that you paid for that Social Security benefit; as far as the US is concerned, you're a filthy-rich expat trying to take advantage Uncle Sam. Personally, I think that if the US government explicitly denies me services because I live abroad with my wife and daughter, they shouldn't be charging me for said services, but what do I know?

It gets even worse when you realize that you may be paying for identical benefits in the country you're living in. However, the US has a handful of Totalization Agreements designed to avoid double-paying Social Security. These are mostly with European governments, so if you live elsewhere, tough luck. I cannot help but wonder if the US government has ever commissioned a study showing how much they spend to enforce and to offset the damage of our unique citizen-based taxation scheme relative to the income generated.


  1. You know, I await with bated breath the day you announce that you are renouncing your US citizenship. The way things are going, that day seems quite inevitable, does it not?

    1. Aristotle, at the present time I'm not planning on giving up my US citizenship. That being said, it gets very tiring listening to the US government tell me about how much I have to pay to support Americans back home when I get nothing in return. Add in the five and six digit penalties for making innocent mistakes on hideously complicated tax forms, even if you don't owe a penny in taxes and are earning less than the penalty amount and I can understand why so many Americans are finally throwing in the towel and claiming citizenship somewhere else.

    2. I know as much and I am aware of your desire. It just looks as though eventually, purely out of self-preservation, the only rational course of action left to you will be to renounce. (But here’s to that day never coming.)

  2. Curtis. I would be interested to know WHY you don't plan to renounce. (If you've mentioned your reason before, then I apologise; I must have missed that one.) Of course one has to have SOME nationality, I guess. Will your little girl ever be claimed as an American by the US government, as the daughter of one?

  3. Yeah, I'm curious too. If I had a European citizenship I'd dump US citizenship in a heartbeat. The US really is waging a war on expats.

    The main reason I read this blog is because I'm strategizing about how to get out.

  4. And by the way, sucks. I waste so much time on this dumb capchas.