# Total Effective U.S. Income Tax Rate Reports



## BBCWatcher (Dec 28, 2012)

I think it'd be interesting to see what our total effective U.S. income tax rates are. Here are what I'd suggest as the ground rules if you'd like to add your own report:

1. Use your actual U.S. tax filing (IRS Form 1040) and report its year.

2. Report your country of overseas residence. If you spent more than non-trivial amounts of time in the U.S., make sure to note that.

3. To calculate your total effective U.S. income tax rate, take your total income tax owed (IRS Form 1040 Line 61 minus Line 56) and divide it by your total gross income. Your total gross income is IRS Form 1040 Line 22, but add back in the FEIE/FHE if you took it (via Line 21, though you may have other Line 21 income, so be careful there to get the math right) and U.S. Tax-Exempt Interest (Line 8b). Round up or down to the nearest tenth of one percent. Let's call this total effective U.S. income tax rate "Calculation A."

4. Your percentage of U.S. source income relative to worldwide (including U.S.) source income, rounded up or down to the nearest tenth of one percent. Let's call that "Calculation B." Be sure to use the same income components that you used in Calculation A. For example, Line 8b is probably all U.S. source income.

So, here's my own report....

*Tax Year: 2013
Country of Residence: Singapore
Total Effective U.S. Income Tax Rate (Calculation A): 5.5%
U.S. Source Income Percentage (Calculation B): 15.0%*

Note that Calculation A treats U.S. source and non-U.S. source income fundamentally the same. For most people that's biasing the percentage higher on non-U.S. source income. (I say that because, in the won't-happen hypothetical of a residence-based income tax system, your U.S. source income would almost certainly be taxed as the _final_ dollars within your total worldwide income, i.e. at the highest marginal rates. It's easy to forget that wee little hypothetical problem, but that's fundamentally how the FTC works already, so that'd probably be how it'd work.) But as a rough "back of the envelope" number Calculation A is at least somewhat interesting.

I think it's fair to take out Line 56 (if present) because that comes back to you as a future guaranteed, inflation-adjusted annuity (joint/survivor). I think it's fair to add Line 8b into gross income because that's just a peculiar quirk in U.S. tax law that foreign governments generally don't respect anyway. These are judgment calls, but I think they're reasonable ones, especially for a back-of-the-envelope calculation like this one.

Calculation B is useful because we'd naturally expect Calculation A to be positively correlated with Calculation B. Calculation B describes, in oversimplified terms, how much of a "U.S. income resident" you are.

What I haven't done yet is to run a full simulation as follows:

1. Take my total non-U.S. income (excluding U.S. source income), throw it into a tax calculator, and figure out the total hypothetical U.S. income tax owed ("X");

2. Take my total income (including U.S. source income), throw it into a tax calculator, and figure out the total hypothetical U.S. income tax owed ("Y");

3. Subtract Y from X ("Z");

4. Take Z and subtract it from my U.S. income tax owed/paid (IRS Form 1040 Line 61 minus Line 56). Call this "Calculation C."

....But I have a pretty good idea how Calculation C would look. My Calculation C would be _very slightly_ negative, i.e. a not-going-to-happen reasonable, hypothetical residence-based income tax system would be _very slightly_ more favorable to me. But not by much -- less than half of one percent of total income, it looks like, eyeballing it.

Anyway, there you go, one anecdote.


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## Nononymous (Jul 12, 2011)

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## Bevdeforges (Nov 16, 2007)

Nononymous said:


> 0
> 0


Me, too. (Though I do notice that BBC's effective tax rate is about the same as Mitt Romney's. Draw your own conclusions from that.)
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

U.S. rate. I pay a much higher rate to the Singapore government. Romney's worldwide income tax rate is quite a bit lower than mine.


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