Michael

I don't think people on E2 visas can opt out. I think only the L-1 visas (employee transfer) has that option. Even L2 visas (derivative of L1 visas) don't have that option. J1 visas have special tax privileges if they leave the US in two years.

bewildering

I am not sure if your children will be eligible, my child has a social security number that we use on the tax form. Perhaps someone else that moved with children can help?

Some people will disagree but i would say yes. As you are in Texas with no income tax (I am in CA with 10% income tax).

And the sales tax is also low in Texas compared with VAT in UK. But it does depend where in Texas you are living for rent and stuff.

I think if you are arrriving in April then your income will from 8 months but you get to use the full exemptions for 2015. I think this will increase your take home pay for 2015.

If you work for a decent company then the HR person will be of great use.

Michael

Can I claim the child tax credit for a child who has an ITIN, rather than a social security number?

Yes, you can claim the child tax credit for a child with an ITIN (individual tax identification number) if you otherwise qualify.

Child Tax Credit

Pulaski

In the UK I used to lose approximately 35% of my gross pay to income tax and NI. In the US I lose about 25% of my gross pay to "mandatory deductions" INCLUDING health insurance premiums and HSA contributions. So yes, some of us have noticed a significant cut in various taxes and deductions taken from our pay when we came to the US.

Michael

A few more things on taxes. For unearned income including interest, non qualified dividends, short term capital gains, rental income, etc. are taxed like normal income. Qualified dividends and long term capital gains are taxed at a maximum of 15% for total incomes below $450,000 (20% above that) and are taxed at 0% if your top marginal tax bracket is less than 25%. Long term capital gains are securities or property held for 1 year or more and qualified dividends are paid by all US common stocks if the shares are held for at least 61 days and are not hedged with options. Some foreign stocks also pay qualified dividends (most European stocks pay qualified dividends but only a small percentage of third world countries do). Whether a company pays qualified or non qualified dividends depends on the type of accounting that is used by the company.

When purchasing foreign securities, sometimes foreign countries tax dividends at the source. Taxes paid can be used as tax credits against US taxes owed. Normally this isn't a problem but if the security is held in a tax free account, foreign taxes paid can't be used as a tax credit against US taxes owed since the tax free account is not taxed so therefore, foreigh taxes paid are just lost.

Your brokerage will send you a year end 1099 that will break down how much of the dividends are qualified and how much is non qualified, interest income, and foreign taxes paid.

If you sell your primary residence, there is an exclusion from capital gains of $500,000 for married filing jointly or $250,000 for married filing separately or single. A primary residence is considered as your primary home that you lived in for at least 2 of the previous 5 years.

When both spouses are working, filling out the W-4 form (withholdings) can be very complex. Since the government doesn't get the forms and don't do the calculations, one employer doesn't know about the other spouses employer and if each of the employees filled out the W-4 claiming married filing jointly caliming all their dependents and allowances, each employer calculates based on that information giving each the standard deduction of married filing jointly and all of their dependents and allowances. Obviously in that case, under withholdings will occur. Normally if you have significant unearned income or a significant amount or unexpected income, you are required to file quarterly tax estimates. Changing the W-4 form can also be done (I've changed my w-4 several times per year when I had changes in income during the year). Although withholdings is just an estimate, there can be penalties if too little is withheld. However there are special rules that may help you to avoid penalties.

Calculating How Much Estimated Tax to Pay

unique_boy

The best thing would be just to get a tax accountant?

bewildering

I used the calculator from the IRS last month, and discovered my wife and I will owe about $2000 extra in January. Sigh. I just changed my withholdings to take out more to offset that amount.

My problem was that I just bought a house and will be itemizing this year for the first time. I overestimated the amount saved by itemizing.

Michael

For the first year, I agree but if your taxes aren't overly complicated, Turbo Tax makes it very easy. In fact, I can do my taxes in about an hour and I can leave it on the computer in case I forgot sometime and make changes before I file the return. If I used a tax accountant, I have to prepare everything in advance and then double check to make sure the tax accountant didn't forget something.

Once you are filing form 1040 (not form 1040NR) and your taxes aren't overly complicated, it's very easy to do the taxes yourself. For state taxes, Turbo Tax uses information entered for the federal taxes to calculate state taxes. For brokerage and/or bank accounts, Turbo Tax can be directed to go directly to those sites and import the information and make all the calculations.

Another thing I don't like about using a tax accountant is that when you don't have a million dollar income and pay the accountant tens of thousands of dollars, they never give you the benefit of the doubt. For instance, when my first wife and I divorced, the divorce decree indicated that I could claim the children on my tax return but when I went to a tax accountant, he said that what is indicated in the divorce decree is not relevant and that I have to prove that I paid at least 1/2 of the children's support and that I had to get my ex involved so that both her and I would each show how much each spent (she could use part of mortgage payments, utilities, etc. for her part of the support since she had primary care). I then did the return myself and just wrote "divorce decree agreement" on the return and the IRS never questioned it.

Michael

The instructions for filling out a W-4 can be very complicated. The best way it to try your best and if you have $2,000 under withheld, each allowance is worth about $4,000 in income and if your top marginal tax bracket is 28%, each reduced allowance will increase your withholding by about $1,128 ($4000 * 0.28). Therefore decreasing your allowance next year by 2 should get you close. The W-4 form is mostly a hunt and peck effort.

unique_boy

I am somewhat financially savvy but I am not a US tax expert. Given that I have a BTL property that was just purchased in the UK for me in my first year I will be using an accountant.

fozzyb

Being the sad muppet that I am, I did the spreadsheet calculations of total tax take for me here in the UK, and what I would expect to be paying if I move to the US (SF Bay area). This is including Income tax (including CA income tax), NI / FICA, BUPA in UK / health insurance for family through employer in US, council tax / property tax (for an estimated house value in US).

For me it comes to 39% in UK, and 36% in the US - so some saving but not dramatic, but that is for one of the most expensive parts of the US. Income tax is significantly lower, but offset by higher property tax and health cover.

Pulaski

Higher property tax can be a killer in some states and municipalities, and is one of the main factors that we decided not to settle in the greater NYC area despite my first job in the US being in Manhattan. Roughly speaking, property tax on a family house in the greater NYC area would have entirely eliminated the tax benefit of us relocating to the US!

I now pay no more in property tax than I paid council tax on my house in London. ..... Except the house is four times the size, on 100 times the land!

fozzyb

The property taxes came as quite a surprise to me when I was researching to put that spreadsheet together - most tax comparison websites only seem to consider income taxes.

Band F council tax in Cambridge = £2250 = ~$3600
Property tax for Mountain View (assumed 1.1% on house value $1M) = $11000

Sally Redux

Yeah I didn't realise we were going to be hit with 10,000 pa rising by 2% annually. Good one to point out to newcomers.

thinbrit

Agreed. You can then use that years tax return as a template for the next years return, which you can file on your own (unless your circumstances change).

Don't forget to claim for moving expenses etc.