Correct. This is another example of why it's so important to get an employer to cover the tax liability of a relocation package.

Sorry, really dumb question(s). Am trying to get a rough estimate of the salary package after deducting amounts for difference in holiday allowance (based on a rate of 1/260th of UK base salary per day of difference) and deducting healthcare costs which we obviously don't pay in the UK.

Am doing this so that I can try to compare his UK and US salaries like-for-like and see how much extra we'll have each month for cost of living adjustment.

Am struggling though. Let's say the salary is $100k (a nice round figure). Does this calculation attached sound right in terms of income tax? How would I then factor in medicare/ss, etc?

I used this site to calculate it (if anyone wants to use it for themselves)
http://www.tax-rates.org/income-tax-calculator

You will also need to allow for local taxes (town/county) if you are buying a home. Here in Westchester a 3 bed home could have a town tax bill in one town of approx $45K per year (the best school districts are usually in the towns with the highest town taxes) and in another $8K per year.

Ok, using my original calculations above, based on the "$100k salary", in addition to the state and federal taxes, would I also deduct SS (@ 4.2% = $4200) plus Medicare (@ 1.45% = $1450)??

Obviously I've allowed no deductions for anything as that's all too complicated.


Property tax scares me even more than the extortionate monthly rentals!

You do pay healthcare costs in the UK...they are rolled into income taxes.

If you are renting...property taxes are included in the cost of the rent.

As Jerseygirl stated, you only directly pay property tax if you buy, not if you rent.
Plus property tax can be used to reduce your income taxes (it can help reduce your adjusted gross income which is the amount you actually pay tax on).

Tax here is not as straightforward as the calculators would lead you to believe. There are many deductions you can take depending on your precise circumstances.

Hi,

We are also moving in May on an L1A visa. You may want to double check the situation regarding FICA/Medicare/US social security. On the HMRC website there is a section for working overseas and paying NI. I think that if you are going for 5 years or less, your company has to still pay class 1 NI payments in the UK and not US social security. There is a treaty between the UK/US so that you don't pay into both. Here is the link:http://www.dwp.gov.uk/international/...agreement/#usa

From doing a quick quote on tax rates dot org of my income tax in MA compared to the UK, i'm paying pretty much exactly the same amount of tax. Yet, I don't get healthcare included for free.

What am I doing wrong in my tax-rates.org calculations, or is an income tax rate parity to be expected? (I am a UK higher rate tax payer).

Thanks everyone for your help so far. I've abandoned trying to work out net figures. Too much of a headache.

We are now in the middle of writing an exec summary type thing to present our case as to why we need more money than has been offered (never done this before so don't know where to start). I think that they have underestimated the difference between where we live and where we're going.

Aside from healthcare, rent and car insurance - are there any other significant cost of living adjustments I'm overlooking (or does everything else combined pretty much wash its face?)

Amanda - one thing to consider is the price of services such as cell phones, tv, & internet. A cell phone contract is MINIMUM $100 in the US on Verizon or AT&T. Cable TV / Internet is another ~$100.

These service pricing are far in excess of anything we pay in the UK. I'm still in shock at how ripped off Americans are over it to be honest.

One quick thing, can I ask if you're being transferred to a USA contract or are you keeping the T&C's of your current UK contract? What type of PTO allowance have you negotiated?

MA is a expensive state, but generally, tax rates will be pretty similar.

It's all about working your tax credits and deductions, most of which come to home owners with a mortgage and people with little kids.

Yeah, you've got sod all US credit history and driving history. It means everything will be more expensive for a couple of years and you'll have much higher start up costs compared to someone moving from one area of the US to another, because of needing deposits for things and getting less favourable rates on your insurance/loans.

Bob, he speaketh the truth!!

Seriously though, it makes a massive difference. As a guide, I support my toddler and wife and own my house and the difference between my income and my adjusted income (which I pay tax on) was about 25% last year. That clearly made a big difference to the amount of tax I paid. Most of that deduction is due to mortgage interest and property tax deductions.

Amanda, SS tax is back up to 6.2% in 2013 (although I think you've wisely abandoned the numbers by now).

Not sure how much of this has been mentioned. I think you said CA for where you're going, and it's likely to be expensive. For rent on anywhere, expect to pay a deposit of at least a month's rent when you move in, and sometimes you even have to pay "first and last" so that could be the equivalent of paying three months' rent as you move in. Depends where you are in CA but $2500 or more per month is likely if you have family.

When we moved the employer paid up to four weeks for us to stay at a residential hotel (the ones where you treat it a bit like an apartment). If your employer can do that (and ideally they expense it) that would be a big help and give you time to find a place to rent.

Yep on the previous post: $100 per month for phone, $100 or more for internet plus tv, electric/gas will vary across the year but could be $150 when it gets hot. Utilities may expect a deposit of $200 each because you won't have credit history. We pay a little more for groceries than we did back home, particularly if you eat healthily your costs are more. You may find your commute is long - a 15 mile commute each way will cost you about $60 every two or so weeks. You might need two cars instead of one, especially with kids.

Just using a round figure like $100K only tells part of the story since there are marginal tax rate brackets. Therefore when bonuses are paid or stock options are exercised, those are taxed at your highest marginal tax rate or possibly even higher if the income for those puts you into a higher marginal tax bracket. For example in your example, a taxable income of $72,900 for married filing jointly had $72,500 taxed on the federal level at 10% or 15% and only the last $400 was taxed at the 25% marginal tax bracket. Therefore any income added to that taxable income will be taxed at the 25% or higher marginal tax rate. However capital gains and qualified dividends are not taxed at a rate higher than 15% unless your income exceeds $450,000.

http://taxes.about.com/od/Federal-In...3-Tax-Year.htm

California also has marginal tax rate brackets and income above the $72,900 taxable income will be taxed at the percentage at or above your highest marginal tax bracket. However California does not calculate the standard deduction in the way that the federal government does so the taxable income will be different for California than the federal government.

http://www.tax-brackets.org/californiataxtable

Therefore any extra income (excluding capital gains and qualified dividends) above a taxable income of $72,900 would likely be taxed at 33% or higher combined federal and state income taxes.

Once your salary gets beyond a certain level, it no longer makes much sense to rent since there are large tax advantages in buying a home since mortgage interest, property taxes, state income taxes (federal deduction only), car registration taxes, and other deductions can be deducted from your income and if the total deductions exceeds you standard deduction, you will likely save at least 33% in taxes on the amount that exceeds your standard deduction.

For example if your taxable income was $100K if the standard deduction was used but if you had $35K of mortgage interest, property taxes, state income taxes, and other deductions, then about an additional $27.5K of that ($35K - $7.5K) would reduce your taxable income to about $72.5K saving you about 33% in taxes on that $27.5K. Therefore your monthly mortgage payment including property taxes could significantly exceed your monthly rent and the cost to you could possibly be less than the rent due to the tax savings. As an example, my son who is single recently purchased his first home in California and his monthly mortgage payment (principle, interest, property taxes, PMI, and hazard insurance) was about $700 per month higher than his rent on his apartment but after calculating his tax savings (about $600 per month), the cost difference to him was only about $100 per month and in 5 years he will have paid off about $50K of the principle and gained in any equity increase at an approximate additional effective cost to him of about $6,000 during the 5 years and he is living in a home about twice the size of his apartment.