Hotscot

In addition...tax bracket, charitable donations, retirement saving 401k, IRA's etc. deductions etc can make your calculations inexact...sometimes it's adequate to go with a ballpark number.

For example you can contribute to a 401k retirement plan and the amount you contribute, up $17.5k I believe, will come off your taxable salary. ie that's $17,500 you won't be taxed on, and that could also put you in a lower tax bracket.

Michael

That's not correct. After deductions and exemptions a certain amount will be taxed at 10%, 15%, and only the amount above the 15% marginal tax bracket will be taxed at 25% (see marginal tax table below the tax calculator).

In the case of married filing jointly with an income of $80,000 using the standard deduction plus exemptions, $28,200 will be deducted from income before using the marginal tax brackets. The tax on $80,000 ($51,800 taxable income) will be $6,863 (10% on the 1st $18,150 and 15% for the amount between $18,150 and $51,800). If both children qualify for the "Child Tax Credit", $1,000 per child will be subtracted from the tax owed for a total tax liability of $4,863 producing an effective tax rate of 6.08% on total income.

1040 Tax Calculator

Publication 972 (2013), Child Tax Credit

If itemized deductions exceed the standard deduction and/or employer deductions for a 401K or FSA are made and/or contributions are made to a traditional IRA, the tax burden will be less and the savings will be at the highest marginal tax rate (15% in this case).

md95065

No.

Nobody fully understands or can explain the income tax system in the US.

Any other questions we can help you with?

Pulaski

For these reasons, others (possible tax charges on your affairs in the UK?), and peace of mind, paying an experienced tax accountant/ CPA to prepare your taxes probably makes sense, for the first year at least.

RICH

Understanding tax, and figuring out your net pay are not the same thing. Loads of employer/state specific variables that may or may not be mandatory, necessary or desireable.

MsElui

ive been here 7 years and im no closer to understanding the tax system lol.

Just bear in mind - its not a PAYE where the 'correct' sum is taken by the employer. Here you 'nominate' a sum of money to be taken (using their fom and statung how many dependants you want to claim for - doesmnt have to be truthful) - that may or may not be correct and its gets all totted up at year end on the tax return you must fill out.

also a lot of other benefits will come out of that salary before its taken home- medical, life assurance, k, dental, vision, legal, elderly care, healthcare expense account etc etc etc.

bewildering

Also, when are you moving exactly? The tax year runs from 1st january to the 31st december. If you arrived in november then I am not sure about how much tax you would pay for 2014.

This is the actual IRS withholding calculator...
2014 Withholding Calculator

Goodlad

Ok so how would I know if my kids would be entitled to Child tax credit?...they are 11 and 7....
So judging by the numbers I could safely say I would be paying somewhat considerably less Income tax than in UK..?

My situation would be as follows:

salary = $81000 per year
Married with 2 kids aged 11 and 7...
I would be paying $450 into 401K
Medical Insurance for whole family would be through my employer costing $250 per month for family.

So from these figures can someone give me a rough idea of take home pay?

Pulaski

Based on Michael's numbers :$(81,000 -$4,863 -($450x12x. 75) - $250x12)/12
=$(81,000-4,863-4,050-3,000)/12 = $69,087/12 = $5,757/ mth. ..... I think, ..... but it's likely to be close to that.

Assuming that 401k is deductible at your marginal tax rate.

Michael

The $5,400 per year 401K contribution doesn't even show as income when you receive your year end w-2 so income will indicate $75,600 ($81,000-$5,400) minus the standard deduction and exemptions ($28,200) for a total taxable income of $49,400 (medical insurance costs through your employer is not deductible unless you itemize deductions and have total deductions greater than $12,400). The tax on $49,400 taxable income is $6,203.

Since both of your children are under 17, in your care, and you provided at least half their support, both should be eligible for the child tax credit and therefore your total tax burden should be $4,203.

If both you and your wife work, there are also child care tax credits which can reduce your tax burden by up to a maximum of $6,000 depending on your salary and child care expenses. The tax credit will be between 20% and 35% of child care expenses depending on income and is a credit so it is subtracted from taxes owed.

Ten Things to Know About the Child and Dependent Care Credit

Canveydave

Loving this thread, thanks to all those who have given figures. I feel like I have a much stronger understanding of the tax system now and to be honest, with 30% of my salary year one being a tax free Ex Pat allowance, I am feeling pretty happy that I won't be paying too much in tax, particularly compared to over here at the moment!

Pulaski

What do you mean by that?

Generally speaking, if you receive money from your employer, or by virtue of your employment, (and usually otherwise e.g. lottery winnings and the value of prizes won in competitions) you will have to pay tax on it.

Canveydave

For the first 12 months of my employment I am eligible for a "Foreign Service Allowance", in line with "self funded per diem rules" This is on a tax free basis.

After 12 months the amount I receive goes up inline with the amount of tax I would have to pay on it. (In my case it would go up $700 a month). At this point I have to pay the tax.

Michael

The calculations were only for federal income tax in this thread. Most states also have a state income tax but 7 states do not and 2 states only tax unearned income and not earned income. The highest state income tax (varies between states) have a marginal tax bracket of about 10% and when itemizing deductions for federal income tax, state income taxes paid is a deduction.

FICA taxes (social security and Medicare taxes) also have not been included in this thread. For people on L-1 visas, usually they can opt to pay their foreign pension taxes instead of FICA for up to 5 years (some restrictions apply).

Canveydave

I will be in Texas, so no State Income Tax for me. I will be on an E2 Treaty visa, so will I be able to opt out of FICA and pay pension taxes over here?