OVERSEAS TAX FAQ #4: Living overseas, must I still pay Social Security, Medicare, and FICA?
If you live abroad but work for a U.S. corporation, you qualify for the foreign earned income exclusion and can exclude up to US$91,400 in wage income (for 2009) from federal income tax. However, you still must pay Social Security, Medicare, and FICA. This usually amounts to 7.5% paid by you and 7.5% paid by your employer. For the purposes of this conversation, I’m ignoring Social Security treaties, which are country-specific. Also, you could still be required to pay state tax if your spouse is living in the United States while you are working abroad. For example, if your spouse lives in California, which does not have a foreign earned income exclusion, the state would tax 50% of your income under a community property tax rule. If you are employed by a non-U.S. corporation, the foreign earned income exclusion rules are as I’ve described, but you do not pay U.S. Social Security, Medicare, or FICA taxes. This is the case even if the foreign corporation is a subsidiary of a U.S. company (
- My year-to-date FICA tax deductions on my last pay stub for the year do not equal my Social Security tax withheld in box 4 of the W-2. Why?
- Are employers required to match all FICA tax payments including social security and medicare?
- Does Medicare or Social Security pay for Assisted Living or Nursing Home Care?