Do US Expats Pay Social Security Tax?

You’ve packed your bags, built a life abroad, and left the American work culture behind –  but the US tax system isn’t quite ready to let you go.

Unlike most countries, the United States continues to tax its citizens no matter where they live.

One of the more overlooked – and costly – elements of that system is Social Security tax. Many expats are surprised to learn they’re still paying into a system they might never benefit from again.

Whether you’re freelancing from Portugal, running a business in Dubai, or managing clients remotely from Thailand, those contributions can quietly add up.

But the news isn’t all bad.

With the right planning, there are legal strategies that can reduce or eliminate this burden, especially if you’re self-employed or operating through an offshore structure.

The Nomad Capitalist team has put together this comprehensive guide to break down:

• When and why US expats pay Social Security tax
• How totalisation agreements work
• What steps you can take to protect your income while living abroad.

Do US Expats Pay Social Security Tax?

The short answer is yes.

The US is one of the very few countries that insists on taxing its citizens regardless of where they live. And that long arm of the Internal Revenue Service doesn’t just reach for your foreign income; it forces you to pay social security, too.

If you live abroad and work for a US-based employer, you’re still expected to pay 6.2% for social security and 1.45% for Medicare. 

This comes out of your pay, and your employer matches it.

If you work for an American company, the IRS doesn’t care where you are. You must pay these contributions. 

However, if you work for a foreign company or run your own business abroad, the rules change.

Totalisation Agreements for Social Security Tax

Totalisation Agreements are US treaties with over 30 countries that help prevent you from paying social security tax in two places.

If your country of residence has a totalisation agreement with the US, you’ll typically pay into only one country’s system – either the US or your new home – not both.

But this only works if you live and work in a country with one of these agreements. Even then, it doesn’t always solve every issue. 

Each agreement is different. Some are broad, some are vague, and some just shift the burden around.

For example, if you live in Germany or the UK, a totalisation agreement can prevent you from being taxed twice. But if you live in a country without an agreement, like Thailand, Malaysia or the UAE, things get tricky. You could be on the hook for two sets of social taxes unless you structure your affairs properly.

This is where intelligent planning comes in. Structuring your residency and business relationships properly can help you navigate this. And no, that doesn’t mean hiding income. It means being smart, legal and proactive – we can help you get this right.

Social Security Taxes for Self-Employed Expats

If you’re self-employed and living overseas, the IRS still wants its cut of your combined income.

Whether you’re a consultant, coach, freelancer or running your own business, you’re treated as both an employer and employee in the eyes of the IRS. That means you’re paying both portions of Social Security and Medicare. That’s 15.3% of your net income. 

Even worse is that the tax sticks no matter where you live. You can exclude your income using the Foreign Earned Income Exclusion or offset your income tax with the Foreign Tax Credit, but neither one touches self-employment tax.

Living in a totalitarian country might get you out of it, but you have to meet the right criteria and claim the exemption properly.

If you want to escape this trap, you could consider setting up a non-US corporation in a tax-friendly country. 

Done right, it could allow you to pay yourself as an employee and potentially skip US self-employment tax altogether. 

It takes effort and proper structuring, but for many US expats, it’s worth it.

Do You Pay Taxes on Social Security?

Sadly, yes. Even if you start collecting your Social Security benefits, the IRS doesn’t take a break.

Your Social Security income, even when you’re retired and living abroad, may still be taxed by the US. Up to 85% of your combined benefits can be considered taxable income, depending on your other sources of income and your filing status.

That’s because Social Security income is classified as US-sourced income. So you can’t exclude it under the Foreign Earned Income Exclusion. That’s even if you haven’t set foot in the States for years.

Some countries have tax treaties that can limit or remove tax on Social Security benefits. Again, it depends entirely on where you live and whether you’ve claimed that treaty benefits correctly on your return.

If you’re not careful, you could end up paying taxes on your retirement income twice. 

Social Security Tax Rate

If you’re self-employed and paying in, the Social Security portion is 12.4% of your income. 

An additional 0.9% Medicare tax applies to wages, compensation, and self-employment income above US$200,000 for single filers, US$250,000 for married couples filing jointly, and US$125,000 for married individuals filing separately.

So yes, a successful expat earning six figures from their own business could be handing nearly 16.2% of their income to a system they may never benefit from.

How to Avoid Paying US Social Security Tax Legally

Social Security tax is hard to avoid if you’re working for a US company or running your own business as a sole proprietor. But once you understand how the system works, you can structure your life and income to sidestep it entirely.

The first step comes down to where you live. 

If you reside in a country that has a totalisation agreement with the US, you may only need to pay into that country’s system. In most cases, that means you can legally skip the US Social Security tax.

The second step involves who you are paid by. 

If your income comes from a non-US employer, you’re usually off the hook for US Social Security. This includes foreign companies, offshore entities and international clients –  assuming you’re properly structured and not simply a sole proprietor with a US bank account.

Then there’s your business structure. If you run your own business, consider forming a foreign corporation in a tax-friendly country and paying yourself a salary through that entity. 

If done right, this can legally shield you from US self-employment tax, which includes Social Security and Medicare.

But going it alone is a tricky business – get it wrong, and the IRS will still want its cut. So, you need proper planning, cross-border tax expertise, and a setup that actually holds up under scrutiny.

Social Security Benefits if You Stop Paying In

A lot of expats pull the plug on paying into Social Security once they leave the US. And it’s a smart move for many. 

But what does that mean for your benefits down the line?

The Social Security system runs on ‘credits’. In 2025, you earn one credit for every US$1,810 in wages or self-employment income, up to four credits per year. 

Once you’ve earned 40 credits from about 10 years of work, you’re eligible to receive benefits at retirement age, even if you move abroad and never pay in again.

So, if you already have those 40 credits, your benefits are locked in. You can stop contributing and still collect later (though the amount will be based on what you paid before).

But if you haven’t hit that mark, you’re stuck. 

You need to either return to US work or find a way to earn US-sourced income that counts toward your credits. Otherwise, you won’t be eligible for anything, no matter how much you paid in.

That said, many location-independent entrepreneurs and high-net-worth individuals choose to walk away from the system entirely. 

Why? They’d rather invest in private retirement vehicles or international pension plans with better returns and fewer limitations.

Social Security was designed for W-2 tax-status employees, not global entrepreneurs and investors. So, if you’re building wealth offshore, you’d probably be better off replacing the system than trying to squeeze more out of it.

Expat Social Security Tax: FAQs

Optimise Your Taxes as a US Expat

Living abroad should be a fresh start – an opportunity to enjoy greater freedom, improved lifestyle, and smarter financial planning.

But for many US expats, the IRS still looms large, especially when it comes to Social Security tax and other cross-border complications.

Too often, Americans overseas find themselves paying into a system they may never benefit from – simply because they didn’t know how to structure their affairs differently.

The good news? You’re not stuck.

With the right legal and strategic approach, it’s entirely possible to reduce or eliminate your U.S. tax liabilities, including Social Security tax, while staying fully compliant.

Whether through treaties, self-employment restructuring, residency planning, or citizenship strategy, you can design a system that works for you – not just Uncle Sam.

At Nomad Capitalist, we’ve helped countless seven- and eight-figure entrepreneurs and investors take back control. We build bespoke global strategies that prioritise your freedom, preserve your wealth, and give you clarity about the road ahead.

If you’re tired of being overtaxed, overregulated, and underappreciated, it might be time to stop playing by the old rules and start creating your own.

Let’s talk about going where you’re treated best.