Moving to the US. How much tax will I pay

[Davies MJ]

This thread is useful - thanks. I'm moving to dc from UK. So I'll pay social security which serves the same purpose as our national insurance. My question is; if after paying social security for x number of years and I return to the UK will I ever get any money back out of it?

[Bevdeforges]

Originally Posted by Davies MJ

This thread is useful - thanks. I'm moving to dc from UK. So I'll pay social security which serves the same purpose as our national insurance. My question is; if after paying social security for x number of years and I return to the UK will I ever get any money back out of it?

Social security in the US is strictly retirement (with some disability in there, too). To qualify for retirement benefits you need to have worked 40 quarters (i.e. 10 years) - but under the various social security treaties with other countries, it may be possible to have some or all of the quarters count toward your home country national pension scheme.
Cheers,
Bev

[Bayonet]

I just found out that when you compute the state tax, there is a state standard deduction as well and your taxable income for federal tax reduces by the amount of state tax you have to pay. Please see below revised calculations for 100K salary. Appreciate if someone can confirm this please. Thanks

STATE TAX
On a salary of 100K, married joint filing standard deduction in NY state is 15000

Taxable income: 100000-15000 = 85000
NY state tax for income over $40,000 but not over $150,000 is $1,946 plus 6.45% of excess over $40,000 = 1946 + (85000-40000)*6.45% = 4848.5

Federal Tax

On a salary of 100K, married filing jointly, standard deducation is 11900, exepmtion for my wife and me is 3800 each. Reduce taxable income by amount of State tax paid i.e 4848.5. Also you get another 2% deduction for expenses related to performing your job i.e. 2000.

Therefore taxable income is

100000-11900-3800-3800-4848.5-2000= 73651.5

Taxes

- 17400@10% = 1740
- 53300@15% = 7995
- 2951.5@25% = 737.875
- Social security + medicare tax @ 4.2% and 1.45% = 5650
Total Taxes - 20971

Total Income after tax: 100000 - 20971 = 79029
Monthly take home - 6586

The above calculation does not include any contributions to 401K or the health insurance contribution that your company might charge.

It will be very comforting if someone can confirm that this is the right method to compute the tax

Many Thanks

[Bevdeforges]

State taxes are tricky to compute in gross like that. Most state income tax forms start with AGI (adjusted gross income) from your federal form and then have you add back deductions that are not allowed at the state level (such as your 401k or IRA contribution, interest on state "tax free" bonds, etc.) and then take any deductions or allowances specific to the state (and these can be almost anything).

And no, you can't reduce your taxable income for federal purposes by state tax paid. That deduction is only available if you itemize your deductions rather than taking the standard deduction.

One other factor to consider is that the employer does not automatically withhold "the right" amount of taxes from your paycheck. There are (fairly elaborate) withholding tables the employers use that are based on the number of dependents you claim. These tables are only a rough approximation of your actual tax bill and it's up to you to adjust your withholding to cover either most of your tax obligation or somewhat more than your tax obligation (if you want to get a refund after you file your taxes).

The best way to get a rough estimate of your federal tax obligation would be to download and fill out one of the simplified tax forms (a 1040A, for example) to see what you can and can't deduct. On the state level, you almost need to do the same with the state income tax forms - though things can get complicated if you will be working in one state and living in another (which is often the case in the NYC area).
Cheers,
Bev

[hercules143]

Originally Posted by Bayonet

Hi,

I have recently been offered an intercompany transffer to the US on L1 visa.

I am looking to get some basic tax advice to calculate my net take home salary. Here is what I understand so far

On a salary of 100K, married joint filing standard deduction is 11,900 and exepmtions for my wife and me will 3,800 per person.

Taxable income: 100000-11900-3800-3800 = 80500

Taxes

- 17400@10% = 1740
- 53300@15% = 7995
- 9800@25% = 3450
- Social security + medicare tax @ 4.2% and 1.45% = 5650
Total Taxes - 18400

Total Income after tax: 100000 - 18400 = 86,600

1. Are my calculations correct?
2. Is there any tax that I have missed. I will be living in New Jersey and working in New York. Does that increase my effective taxes in anyway?
3. Is contribution to 401K mandatory?
4. Would contributions to 401K will directly reduce my taxable income by the same amount.

I would very much appreciate any help that I can get fom this forum.

Many Thanks

I think besides of all taxes you should also include cost of living includes housing expenses, utilities, food costs, gas costs, state income and any other major expenditure.

[Bayonet]

Originally Posted by Bevdeforges

State taxes are tricky to compute in gross like that. Most state income tax forms start with AGI (adjusted gross income) from your federal form and then have you add back deductions that are not allowed at the state level (such as your 401k or IRA contribution, interest on state "tax free" bonds, etc.) and then take any deductions or allowances specific to the state (and these can be almost anything).

And no, you can't reduce your taxable income for federal purposes by state tax paid. That deduction is only available if you itemize your deductions rather than taking the standard deduction.

One other factor to consider is that the employer does not automatically withhold "the right" amount of taxes from your paycheck. There are (fairly elaborate) withholding tables the employers use that are based on the number of dependents you claim. These tables are only a rough approximation of your actual tax bill and it's up to you to adjust your withholding to cover either most of your tax obligation or somewhat more than your tax obligation (if you want to get a refund after you file your taxes).

The best way to get a rough estimate of your federal tax obligation would be to download and fill out one of the simplified tax forms (a 1040A, for example) to see what you can and can't deduct. On the state level, you almost need to do the same with the state income tax forms - though things can get complicated if you will be working in one state and living in another (which is often the case in the NYC area).
Cheers,
Bev

Thanks Bev,

I have accepted the offer. I will very soon find out how good my calculations were

[JamesRing]

Your employer may have a generous 401k match policy. Depending on this, I would consider making contributions even if you don't plan to retire in the US. If they do match, then by not making a contribution you are walking away from free money.

[Bayonet]

Unfortunately they dont have a 401K policy. I was told there will be no contributions by the Company. Is that even legal? If my employer is not contributing to my 401K then I would rather want to manage my own retirement investment.

[JamesRing]

There's no requirement for anybody to contribute towards your retirement, not even you. There are a variety of tax-advantaged investment vehicles, but I'm not an expert. There's plenty written on the subject of course! Just search for "tax-advantaged retirement" or something like that.

[JohnSoCal]

Originally Posted by twostep

401k cannot be withdrawn without full taxation and penalties prior to official retirement age but you can borrow against it.

401K withdrawals can be made without any penalty at the age of 59.5 which is earlier than the official retirement age.