As a US citizen, working abroad can make taxation a complicated process, and this is only made more difficult if you're self-employed. If you spend most of the tax year in a country other than the US, you can apply for an exemption on your income tax. The critical difference is that if you're self-employed, you'll still need to pay social security and Medicare taxes at a rate of 15.3% of your income up to the first $132,900. Then, there’s an additional 2.9% Medicare tax on any other income you earn above this. The combination of these taxes is often called SE tax and is challenging to get out of.

If you're running a legitimate business, then there are some ways of getting out of paying for SE tax. There will be some costs to do this, but the amount of tax you'd be liable for is well worth investigating. One of the main ways people can become exempt from paying SE tax is by employing themselves in a foreign company, ideally somewhere with beneficial tax laws. The approach is only relevant to those that move regularly, such as a digital nomad, and you must also not have any operations in the US.

Click here to know, how much do you have to make to file taxes

When incorporating a country with favorable tax laws, you'll need an LLC, which will reduce the amount of tax you pay, but comes with some setup cost. Another option is to incorporate your business in a county like the UK, which is more reputable but has higher corporation tax rates. If you're looking to incorporate your business in the US, it's worth having a consultant to help you through the process, such as https://taxfyle.com/business-incorporation-services.

If you offer a service, this process is unfortunately not possible, as laws in the US stop you from giving the profits from a service performed by a particular person to another.

Moving to social security, depending on where you're spending your time, there may be an agreement between where you live and the US, which means that you only pay for the country you live in. The benefit of this is that you'll still get the benefits of living in the US, such as a state pension available to you if you return. Twenty-five countries have totalization agreements with the US, so make sure to check if this is an option for you.

The next main form of tax that US citizens pay outside of federal income and SE tax is a state tax. Depending on the state you're from, the ease you can get out of paying taxes will change. A general rule that many US states follow is that you're only liable to pay taxes in that state if you've lived there for at least six months of the tax year. There's a variation from state to state, though, so take the time to research the criteria for where you previously lived.