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Connect on LinkedInThe US requires all Americans to file US taxes every year, reporting their worldwide income. This includes Americans living abroad.
Additionally, American expats have to claim exemptions such as the Foreign Tax Credit and the Foreign Earned Income Exclusion to reduce their US tax bill. Most US taxpayers living abroad can reduce their US tax bill to zero this way, although they always still have to file to claim these exemptions.
Americans with foreign registered bank accounts, investments, and business interests may also have to report them, depending on their account or asset values.
Taken together, these requirements mean that US filing for Americans who live abroad is more complex than for Americans living in the States. Foreign banks and governments are providing details about US expats’ finances directly to the IRS too, so it’s no longer possible for expats to hope they can stay under the IRS’ radar to avoid fines.
Key Updates for 2025
- For 2025, the standard Medicare tax rate continues at 1.45% for both employees and employers, with no wage base limit.
- The 0.9% Additional Medicare Tax still applies to wages exceeding $200,000 for single filers and $250,000 for joint filers.
- As of January 2025, the U.S. maintains 30 active Totalization Agreements to prevent dual Social Security and Medicare taxation for expats.
Which American expats must pay Medicare Tax?
Because the US requires all Americans to file US taxes globally, many expats are also required to pay US social security tax and Medicare Tax. There are two specific groups who this most frequently impacts.
Expats who work for an American employer
Americans who work for US entities are subject to Medicare Tax, including those employed by the US government, any individual who is a US resident, a partnership of which at least two-thirds of the partners are US residents, a trust of which all the trustees are US residents, or a corporation organized under the laws of the United States. Expats who work for American employers US payroll tax deducted from their paycheck, which consists of 6.2% social security tax and 1.45% Medicare Tax.
Expats who are self-employed
Self-employed US taxpayers are required to pay both the employer’s and employee’s social security and Medicare contributions, adding up to a total of 12.4% social security tax and 2.9% Medicare Tax, on their global earnings. Self-employed expats pay these taxes on all their income over just $400.
What about double social security taxation?
Expats who work for an American employer or who are self-employed and so have to pay US social security and Medicare contributions may find that they qualify to pay foreign social security contributions in the country where they live, too. This leaves them at risk of paying social security taxes twice.
“In general, U.S. social security and Medicare taxes continue to apply to wages for services you perform as an employee outside of the United States in certain circumstances.”- the IRS
Unfortunately, the exemptions and credits that expats can claim when they file to reduce their US income tax bill such as the Foreign Earned Income Exclusion don’t also exempt them from paying US social security or Medicare taxes.
The US does have a set of treaties called Totalization Agreements with thirty other countries to prevent double social security taxation. These treaties set out which country expats should pay to (normally depending on how long they will be living in that country for), with contributions counting towards social security payments in both systems.
As of February 2025 the covered countries are: Italy, Germany, Switzerland, Belgium, Norway, Canada, the United Kingdom, Sweden, Spain, France, Portugal, the Netherlands, Austria, Finland, Ireland, Luxembourg, Greece, South Korea, Chile, Australia, Japan, Denmark, the Czech Republic, Poland, the Slovak Republic, Hungary, Brazil, Uruguay, Slovenia, and Iceland.
Expats who live in one of these thirty countries therefore may not have to pay Medicare Tax even if they are self-employed or work for a US employer.
Some self-employed expats who don’t live in a country the US has a Totalization Agreement with may benefit from setting up a foreign corporation in a low or no tax jurisdiction which then employs them. Once they are employed by a foreign company, they no longer have to pay US social security and Medicare contributions (although this could affect the ability to receive future social security payments, and it would also trigger extra reporting requirements relating to the new company). It’s always worth expats consulting an expat tax specialist to ensure that they file in their best long and short term interests.
What about Additional Medicare Tax?
Expats who pay Medicare Tax and who earn over $200,000 (single filers) or $250,000 (joint filers) are liable to pay an additional 0.9% Medicare Tax on their earnings over the thresholds.
Can expats receive Medicare coverage abroad?
Despite expats who work for an American firm and those who are self-employed having to pay Medicare Tax, the Medicare system won’t pay for their health care or supplies abroad.
Exceptions are only made if a foreign hospital is nearer than a US hospital to your US home (so for Americans living in the US near the Canadian or Mexican borders), or if they happen to be near these borders in an emergency medical situation, even if they live elsewhere in the US. Medicare will also pay Canadian medical costs for Americans who have a medical emergency while traveling between the US and Alaska, if a Canadian hospital is nearer than a US one. The only other exception is an emergency on a cruise ship not more than 6 hours from a US port.
What should expats who should have been paying Medicare Tax but haven’t do?
Expats who haven’t filed their US taxes, including social security and Medicare contributions, because they weren’t aware that they have to can catch up under an IRS amnesty program called the Streamlined Procedure, so long as they do so voluntarily before the IRS contacts them about it.
Expats with any questions or doubts about their US tax filing from abroad should seek advice from a US expat specialist at the earliest opportunity to avoid future issues with the IRS.
Frequently Asked Questions (FAQs)
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Do U.S. expats have to pay Medicare tax?
Yes, U.S. citizens working abroad for American employers are generally subject to Medicare tax.
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What if I'm self-employed overseas?
Self-employed U.S. expats must pay self-employment tax, which includes Medicare tax, unless they reside in a country with a Totalization Agreement that exempts them.
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Can I opt out of Medicare tax by working for a foreign employer?
Working for a non-U.S. employer may exempt you from U.S. Medicare tax, but this could affect your future eligibility for Medicare benefits.
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What is the Additional Medicare Tax, and does it affect expats?
The Additional Medicare Tax of 0.9% applies to high-income earners, including expats, on wages exceeding $200,000 (single) or $250,000 (joint).
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Do Totalization Agreements affect my Medicare tax obligations?
Yes, Totalization Agreements between the U.S. and certain countries can prevent double taxation of Social Security and Medicare taxes for expats.
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Will I receive Medicare benefits while living abroad?
Generally, Medicare does not provide coverage outside the U.S., so paying Medicare tax doesn’t grant expats overseas medical benefits.
