What is Schedule SE? A Guide for Self-Employed American Expats 

According to the IRS, you must pay self-employment tax if your net earnings from self-employment are $400 or more. The good news is that even after paying self-employment tax, most expats owe $0 in federal income tax thanks to the Foreign Earned Income Exclusion. 

Schedule SE (Form 1040) is used by self-employed persons to figure the self-employment tax due on net earnings. Schedule SE calculates your self-employment tax, which covers Social Security and Medicare contributions that you’d normally split with an employer. The current rate is 15.3% (12.4% Social Security + 2.9% Medicare) on your net business income.

Do Self-Employed Expats Need to File Schedule SE? 

Yes, if you’re self-employed abroad and have net earnings of $400 or more, you must file Schedule SE regardless of where you live or work. This applies to: 

• Freelancers and independent contractors 
• Digital nomads running their own businesses 
• Consultants and professional service providers 
• Small business owners operating abroad 
• Anyone with income from self-employment activities 

How Does Schedule SE Work with the Foreign Earned Income Exclusion? 

This is where many expat entrepreneurs get confused, but here’s the key distinction: 

FEIE excludes income from federal income tax only.

Even if the Foreign Earned Income Exclusion excludes all your income, self-employed taxpayers must still pay self-employment tax on their net business income. 

Let’s say you’re a freelance graphic designer living in Portugal earning $80,000: 

1. Income Tax: You can exclude the full $80,000 using FEIE (2025 limit: $130,000) 
2. Self-Employment Tax: You still pay 15.3% on $80,000 = $12,240 
3. Deduction: You get to deduct half the SE tax ($6,120) from your income 

Bottom line: You’d owe approximately $12,240 in self-employment tax but $0 in federal income tax. 

What’s the Difference Between Schedule SE and Schedule C? 

Schedule C and Schedule SE work together but serve different purposes: 

Schedule C reports your business income and expenses: 

• Gross receipts from your business 
• Business deductions (office supplies, travel, etc.) 
• Net profit or loss 

Schedule SE calculates taxes on that net profit: 

• Takes the net income from Schedule C 
• Applies the 15.3% self-employment tax rate 
• Calculates your Social Security and Medicare contributions 

Think of it this way: Schedule C tells you how much you made, Schedule SE tells you what you owe in self-employment taxes on those earnings. 

Step-by-Step: Completing Schedule SE as an Expat 

Step 1: Calculate Your Net Earnings 

Start with your net profit from Schedule C. This should already be converted to USD using appropriate exchange rates. 

Step 2: Apply the 92.35% Factor 

Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. This accounts for the employer portion of Social Security and Medicare taxes. 

Example: $100,000 net profit × 92.35% = $92,350 subject to SE tax 

Step 3: Calculate Self-Employment Tax 

Apply the 15.3% rate to your adjusted earnings: 

• $92,350 × 15.3% = $14,130 total SE tax 

Step 4: Deduction for Half of SE Tax 

You can deduct half of your self-employment tax: 

• $14,130 ÷ 2 = $7,065 deduction on your Form 1040 

How to Fill Out Schedule SE Form: Line-by-Line Instructions

Schedule SE calculates your self-employment tax using separate calculations for Social Security and Medicare taxes. Here’s how to complete each line:

Part I: Self-Employment Tax

• Lines 1a-1b: Farm Income and Conservation Payments: Most expats enter $0 unless you have farming income from Schedule F.
• Line 2: Net Profit from Business: Enter your net profit from Schedule C, line 31 (already converted to USD). This is your main business income.
• Line 3: Total Net Earnings: Add lines 1a, 1b, and 2.
• Line 4a: Apply 92.35% Factor: Multiply line 3 by 92.35% (0.9235). This accounts for the employer portion of taxes. Example: $100,000 × 0.9235 = $92,350
• Line 4c: Combined Earnings: Equals line 4a (unless using optional methods).
• Lines 5a-6: Church Income and Total: Skip lines 5a-5b unless you have church employee income. Line 6 equals line 4c for most expats.
• Line 7: Social Security Wage Base: Enter $168,600 (2024) or $176,100 (2025) – the maximum subject to Social Security tax.
• Lines 8a-9: Existing Social Security Wages: Report any W-2 wages already subject to Social Security tax (line 8d), then subtract from line 7 (line 9).
• Line 10: Social Security Tax (12.4%): Multiply the smaller of line 6 or line 9 by 12.4%.
• Line 11: Medicare Tax (2.9%): Multiply line 6 by 2.9%. No wage base limit applies.
• Line 12: Total Self-Employment Tax: Add lines 10 and 11. Transfer to Schedule 2 (Form 1040), line 4.
• Line 13: Deduction for Half of SE Tax: Multiply line 12 by 50%. Transfer to Schedule 1 (Form 1040), line 15.

Part II: Optional Methods

These methods allow you to pay self-employment tax even when your actual earnings are very low, ensuring you receive Social Security credits for the year.

• Farm Optional Method (Lines 14-15): Use only if your gross farm income wasn’t more than $10,380 or your net farm profits were less than $7,493. You can report two-thirds of gross farm income (minimum $6,920) instead of actual net earnings. Limited to five times in your lifetime.
• Nonfarm Optional Method (Lines 16-17): Use only if your net nonfarm profits were less than $7,493 AND less than 72.189% of gross nonfarm income, with at least $400 in self-employment earnings in 2 of the prior 3 years. You can report two-thirds of gross nonfarm income instead of actual net earnings. Also limited to five times in your lifetime.

When Expats Might Use Optional Methods:

• Digital nomads with very low income in a particular year, but who want Social Security credits
• Consultants between major contracts who had minimal earnings
• Business owners during startup years who have high expenses but low net profit

Most expats with standard freelance or business income above $7,493 won’t qualify for or need these optional methods.

Common Expat Scenarios with Schedule SE 

High-Tax Countries 

If you live in Germany, France, or the UK and pay significant foreign taxes, you might benefit from the Foreign Tax Credit instead of FEIE. However, you’ll still owe self-employment tax regardless of which strategy you choose. 

Low-Tax Countries 

In countries like the UAE or Monaco with no income tax, FEIE becomes extremely valuable. You can exclude up to $130,000 from federal income tax while only paying self-employment tax. 

Digital Nomads 

If you’re constantly moving between countries, tracking the Physical Presence Test becomes crucial for FEIE qualification. Your self-employment tax obligations remain the same regardless of location. 

Relief for Self-Employment Tax: Totalization Agreements 

Some countries have Social Security agreements with the US that can eliminate double taxation on Social Security and Medicare taxes. International Social Security agreements, better known as “totalization agreements,” are similar to tax treaties, but for Social Security and Medicare taxes instead of income taxes. 

Countries with totalization agreements include: 

• Germany, UK, France, Canada 
• Australia, Japan, South Korea 
• And many others 

If you qualify, you may pay social security taxes to only one country instead of both. 

Key Deadlines and Requirements 

Filing Deadlines: 

• April 15: Standard deadline 
• June 15: Automatic extension for expats (no forms required) 
• October 15: With Form 4868 extension 

Quarterly Payments: If you expect to owe $1,000 or more in total taxes (including SE tax), you should make quarterly estimated payments. 

Forms You’ll Need: 

• Form 1040: Main tax return 
• Schedule C: Business income and expenses 
• Schedule SE: Self-employment tax calculation 
• Form 2555: Foreign Earned Income Exclusion (if using FEIE) 

Common Mistakes to Avoid 

1. Not filing Schedule SE, thinking FEIE eliminates all tax obligations 
2. Using gross income instead of net income for SE tax calculations 
3. Forgetting currency conversion requirements for foreign earnings 
4. Missing quarterly payments and facing penalties 
5. Assuming all foreign taxes qualify for totalization agreement benefits 

Your Next Steps 

Filing as a self-employed expat doesn’t have to be overwhelming. Here’s what to do: 

1. Gather your documents: Business income records, expense receipts, and currency conversion rates 
2. Determine your strategy: FEIE vs. Foreign Tax Credit based on your situation 
3. Calculate correctly: Use proper forms and current tax rates 
4. File on time: Take advantage of automatic expat extensions when needed 

Remember, you’ll likely end up owing minimal federal income tax while staying compliant with self-employment tax requirements. 

Peace of Mind for Your Expat Taxes 

Greenback is an American company founded in 2009 by US expats for expats. We’ve focused exclusively on expat taxes and always have. Many of our CPAs and Enrolled Agents are expats themselves, and because they live in 14 time zones, they experience firsthand the challenges of living abroad. They have the knowledge and patience to help you through the complicated U.S. tax system and your local rules. 

We’ve helped over 23,000 expats file over 71,000 returns while maintaining a 4.9-star average on TrustPilot. We’re proud of our high repeat client rates and the consistency required to prepare accurate tax returns for clients in 190+ countries. 

Ready to get started? Click the “get started” button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.

This information is for general guidance only and should not be considered professional tax advice. Tax laws are complex and subject to change. Please consult with a qualified tax professional for specific advice regarding your individual tax situation.