As an American entrepreneur living abroad there are several tax considerations you should make before starting a business overseas.
Below we have put together a summary of the US tax implications of being a self employed US expat abroad
Tax Filing requirements for Self-Employed US Expats
As a self-employed US expat the threshold for triggering filing obligations is different for employed US expats. If you earn over $400 in a year, you will be required to file a tax return. It is likely that you will also be required to file a Schedule C or Schedule C-EZ. The rate for self-employment taxes is currently set at 15.3% 12.4% covers social security and 2.9% for Medicare.
As a higher earner you could be subject to additional Medicare taxes; the threshold is $250,000 in income for those who are married filing jointly, and $200,000 got single filers. Medicare tax does not have a limit while social security is limited to the first $128,400 of your income.
Where are you located?
A big factor in determining how much tax you owe as a self-employed American abroad is where you reside. The deadlines for filing differ, as does the amount of tax you owe.
Deductions for expenses
Appropriate businesses can be deducted to reduce tax owed. The expenses you can claim as a self-employed American living overseas include (but are not limited to) work related:
· Meals and entertainment
Foreign Bank Account Report
A critical component of taxes for a self-employed US expat is the Foreign Bank Account Report (FBAR). This works to calculate your tax owed on money in foreign bank accounts.
You can be subject to harsh penalties for failing to file an FBAR as a self-employed US expat.