# Moving to the US. How much tax will I pay



## Bayonet (Apr 24, 2012)

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 

- [email protected]% = 1740
- [email protected]% = 7995
- [email protected]% = 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


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## Bayonet (Apr 24, 2012)

Anyone?


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## Bevdeforges (Nov 16, 2007)

Give us a little time. Remember it's 5 or 6 hours (at least) earlier back in the US of A. And some of us with information to share have lives offline. (I just got back from a rush trip to the veterinarians - but things seem to be ok now.)

Your calculations are ok as far as they go but there are a few little extras you may want to consider:

New Jersey has a state income tax, as does New York. When you live in one state and work in another, you usually wind up having to file state income taxes in both states - but like with expats, you get credits in one state for what you wind up paying in the other.

There are also a few extras that may or may not be taken out of your paycheck - you mention the 401K. Usually those aren't obligatory, but given the paltry amount of social security you'll get when you retire, you want to consider very carefully before opting out. What you have taken out of your pay for the 401K is not subject to Federal income tax. (It varies by state whether or not you get the same break at the state level.)

Also, medical insurance in the US is bizarre. These days, the employer is less and less likely to pay for 100% of the insurance premiums, and very often, if you want coverage for family members, you pay for that (all taken out of your paycheck).
Cheers,
Bev


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## Bayonet (Apr 24, 2012)

Thank you Bev.

Just so that I fully understand, I can get credit against the state taxes I pay? If that's the case then my effective tax should be more or less the same?

I am aware of the medical insurance expense in the US and my employer is paying 100% premium for both my wife and me.

I am not really looking froward to settle down in the US, just want to spend a few years and then return to my country therefore not too keen on 401K.

Thanks


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## Bayonet (Apr 24, 2012)

Bayonet said:


> Thank you Bev.
> 
> Just so that I fully understand, I can get credit against the state taxes I pay? If that's the case then my effective tax should be more or less the same?
> 
> ...



Sorry what I realy want to check is that the state tax that I pay, is that deductible from the federal tax? Really I looking to find out how much I bring home, assuming there are no other line items on my pay advice apart from the taxes.

Thank you.


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## twostep (Apr 3, 2008)

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


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## Bevdeforges (Nov 16, 2007)

State taxes are only deductible from your taxable income for Federal purposes if you itemize your deductions (which mean, in effect, if you can prove more allowable specific deductions than the standard deduction gives you). Normally, you need to have bought a house and have deductible mortgage before you have enough deductions to warrant itemizing.

On the state income taxes, if you're subject to two different state taxes, there should be offsets so that you're not actually double taxed on your income. (So, if you pay state income tax to New Jersey on one kind of income, and to New York on another, you declare your entire income to both states, and then offset an allowance for what you paid to the other state. Exactly how the "allowances" work varies considerably.)

Just as a ballpark figure, count on about 7% or so for state income tax in that Northeast corridor.
Cheers,
Bev


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## Bayonet (Apr 24, 2012)

Thanks Bev.

I guess i will add another 7% to the taxes. I dont think I would have enough itemized deductions to go beyond the standard deduction.

I really appreciate your help.

Cheers


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## drakecabot (Mar 20, 2012)

Not wishing to come across as pedantic, but hoping you have realised the mistake in your maths?
"Total Income after tax: 100000 - 18400 = 86,600". Should equal 81600.


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## Bayonet (Apr 24, 2012)

Thanks,

The real calculations are in an excel sheet so my after tax number should be ok there.


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## Davies MJ (Mar 5, 2012)

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?


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## Bevdeforges (Nov 16, 2007)

Davies MJ said:


> 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


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## Bayonet (Apr 24, 2012)

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*

- [email protected]% = 1740
- [email protected]% = 7995
- [email protected]% = 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


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## Bevdeforges (Nov 16, 2007)

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


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## hercules143 (Apr 7, 2012)

Bayonet said:


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




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.


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## Bayonet (Apr 24, 2012)

Bevdeforges said:


> 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.
> 
> ...




Thanks Bev,

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


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## JamesRing (Apr 24, 2009)

*401k*

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.


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## Bayonet (Apr 24, 2012)

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.


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## JamesRing (Apr 24, 2009)

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.


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## JohnSoCal (Sep 2, 2007)

twostep said:


> 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.


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## renski (Apr 7, 2009)

Bayonet said:


> 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
> ...


Hey,

What is the 3800 deduction for? I'm moving to DC in September so just curious.

Also, you need to be taking off the state tax from your total income.


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## Bevdeforges (Nov 16, 2007)

renski said:


> Hey,
> 
> What is the 3800 deduction for? I'm moving to DC in September so just curious.
> 
> Also, you need to be taking off the state tax from your total income.


The 3800 is what is called the "personal exemption" - it's a deduction from adjusted gross income that you get for yourself, your spouse (if you're filing jointly) and for each of your dependents.

You don't always take the state tax from your income. If you take the standard deduction (as Bayonet did in the example) you can't then take certain "itemized" deductions. The standardized deduction is a simplification of the process for those who don't have major deductible expenses (primarily a mortgage).
Cheers,
Bev


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## renski (Apr 7, 2009)

Ahh. thanks 

I see now he has added state tax to the total taxes.


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