Schedule C and the foreign earned income exclusion

If you are self employed, you can still earn your first $91,400 income tax free (2009), but your net income is subject to self employment taxes of 15.3%…

That’s a big number.

You have 2 options:

1. If you are living in a country with a totalization agreement with the US (Commonly referred as tax treaties), and paying into their social security system, you won’t be double taxed. Simply opt out of the US social security system (Which you only do for years you elect, not for ever). See IRS totalization agreements information.

2. Establish a legal entity in the country where you live, which will help you with the locals in terms of doing business and the wages that legal entity would pay you would not be subject to self employment taxes and indeed qualify for the foreign earned income exclusion.

Leave a Reply