billy_a

Hi, hoping someone can clarify the salary deductions (tax,pension,medical,etc) in USA so I can understand net income. Im currently interested in a job in Texas which will be on a H1b visa and my wife will join me on a dependent visa (I guess thats the only way she can join me if she is unemployed).

I see there are various deductions, such as federal and income tax (doesn't apply to Texas), FICA & state insurance, health plan insurance, HSA or FSA.

So, I have been using the online salary calculator, am I allowed to put my marital status as married even if my partner is on a dependent visa and not allowed to work in the US? I see this option increases my net income. Is there any downside to putting married down? Also, should I select married-filing-jointly or separately? what's the difference?

Work place is providing 2 health plans, self insured plan and a fully insured plan which is ~$115 more per biweekly payments. What are poeples opinion on the 2 plans and how to decide which one to go for. We both don't have any health issues so was tempted by the self insured plan but as the same time thinking is it better to just get the fully insured plan for peace of mind?

Glasgow Girl

So long as you are legally married you can elect Married Filing Jointly, MFJ, or Married Filing Separately, MFS. MFJ usually provides married couples with the better tax outcome especially if one of you has no or very low income, but very occasionally MFS can work out better​​. It all depends upon how your income is spread between both of you and what deductions you claim. MFJ means that one return covers both of you, MFS means that you both have to file your own return. MFJ is almost certainly your best bet because you will get the larger married allowance and pay less tax if wife has no income of any kind (including from the UK). You can calculate the tax due both ways using PC based programs and you won’t have to make a final decision until you file your taxes. Some people file separately if they are no longer together but still married, or because for whatever reason they do not trust the other one.

On the health plan, it is impossible to say without knowing the details of each plan. However, healthcare is extremely expensive over here, and for the first year you should almost certainly go with full coverage until you fully understand the costs, and how it works. Medical insurance is not an area to cut corners on or to take a risk on, having inadequate insurance can be costly at best and worst case will bankrupt you. Accidents happen to all of us, and even a minor injury can cost $0,000 of dollars.

billy_a

Thanks for the reply, makes a lot more sense now regarding the tax. As my wife does not work and isnt likely to work anytime soon, then MFJ would be the best option to go for.

And agree with your point on the health care plan, its a good point you make, I think I will go with the full coverage to be on the safe side until I'm more familiar with how the health system works.

You mention filing taxes, so does that mean no tax is deducted from my biweekly/monthly payslip? is that filed at the end of the year? If so, does that include both federal and state income tax and FICA?

tht

The health “insurance” is a little more nuanced than go for “full coverage”. What you have to look at is the sum of all the premium paid (by employer or you) and then the higher of deductible and OOP maximum. Depending on the size of employer and setup there could be lots of different options, but it sounds like you are being offered a “regular” plan and HDHP with a HSA. The later involves some level of “self insuring” for a year or 2, but if you are healthy and don’t make many claims above the “well visits” you end up with a tax free investment pot and after a couple of years that wound cover the OOP Maximum and you end up ahead. The employer may also contribute the HSA funds.

What is better really depends on what portion
/ maximum an employer will pay. COBRA won’t be relevant to you on an H1b as you would have to leave the US if terminated, but I have picked a plan before that cost the employer less because taking the maximum plan could have meant a very high COBRA premium if termination was right after open enrollment. You can downgrade during open enrollment.

It may be a function of more employees taking a certain plan, but I have seen situations where when you put all the figures in a spreadsheet 1 option stands out as the best one that you may not expect. For the employer plans I have setup/administered I have usually set it to 80% paid by the employer…20% by the employer but with a maximum $ amount because some of the plans that support out of network coverage can get very expensive. The devil really is in the detail…

I had 1 job where there was only 1 option, so I went on my wife’s plan instead and and negroideste a cash bonus for not enrolling in my employers plan… win win for both of us..

tht

tax’s are withheld, and take account for standard deductions, you have to advise what these are …. Assuming your tax’s are simple you likely won’t owe more and may get a small refund after you file your annual taxs….

Nutmegger

As tht said, your taxes are deducted from each paycheck (get used to that spelling!). However, everyone has to review their prior year's taxes and file a return before April 15 each year -- for federal, state, and (if relevant) city taxes. This could involve an adjustment up or down.

Glasgow Girl

This is making my point. Making an educated decision can only be done when you understand the cost of healthcare, the cost of coverage and how the system works. It is quite complex for new arrivals, especially when you have so much more to contend with in your first year.. Just understanding the jargon is bad enough. Every year, normally at the end of the calendar year you get to change your plan so you can always change your mind at that time.

Pulaski

I'd lean towards the High Deductible health insurance plan even in your first year if you are both [1] healthy with no on-going treatment or medications, [2] have no additional dependents, and [3] have a reasonably well paid job that could, in the worst case scenario, handle the maximum deductible as specified in the plan details (it is likely somewhere around $2k-$3k per person).

Also take a look at the premiums on the "full coverage" plan, and see how much you would save by taking the HD option, then deduct that from the maximum deductible. .... When we did that calculation in the year before we switched to High Deductible insurance, we discovered that the additional premiums were almost identical to the maximum deductible on the HD plan. In other words the worst case scenario on the HD plan was to have the same costs as the "full coverage" plan. ... And if we stayed healthy then the HD plan literally put money in the bank for us, and tax free money at that (very similar to a private pension or 401k account).

Since then, (that was 2008) I have have saved some money every year, depending on medical expenses, but usually $000's, so at this point I could pay the maximum individual deductible every year pretty much indefinitely, .... because I keep adding tax free money every year, and I can add pretty much the same as the maximum deductible every year. Bear in mind that my wife also works and has her own insurance and her own HSA.

You do need to do your own calculations though, as there are some employers offer plans where there is little or no benefit to taking the HD option.

Some people have argued that I am "gambling with my family's health insurance, but they fail to understand that the insurance coverage (medical treatment) is identical, the only difference is whether I pay $1k of $10k of medical bills, or $3k if all the medical expenses were for one of us (in my case it could be a maximum of $8k if the bills were split evenly across all three of us - which I will admit, would deplete my HSA account balance).

billy_a

Thanks all for the replies, its starting to make a lot more sense now.

One more question, currently in the UK, my net monthly income is around £2700 thats after all deductions, yes its pretty low as Im paying student loan and 5% pension. But for this job im interested in Texas, San Antonio, I think I will net around $7000/month so more than double my UK salary. Is it worth making the move, I've always wanted to move to USA and im currently living in Warwick which is pretty expensive but not as expensive as London and from my research San Antonio will be pretty reasonable and living on around 7000/month, will be able to live comfortably I guess and a lot better than UK? Or am I not seeing something quite obvious which should be stopping me making the move. I know there is a lot to consider but just interested in other peoples experiences with moving to US with higher salary, have they been able to live more comfortably especially in a state which is pretty reasonable?

civilservant

65-70% take home is a decent place to start your thinking, depending on if you intend to make elective deductions to a 401k.

Personally, I think anything less than $100k is simply not worth making the move, especially as you will be the sole earner. Your wife would not be able to work until such time as you are petitioned for Permeant Residence (aka Green Card) unless she can get an independent visa.

billy_a

is that $100k before tax (gross salary) or after tax (net pay)? The salary range for this job will be around $120k and then there is no state tax in texas which makes it attractive.

Pulaski

If you're relatively young, make the move. Few of us had great pay in our 20's and you will be expecting good salary growth over the next decade .... I mean, your UK income is really pretty low, so it's not like you're giving up a good standard of living to move. This sounds like a good opportunity that you will regret not taking if you don't accept it.

For a couple on $120k gross you should be able to live fairly comfortably, certainly better than on £2,700/mth net in the UK.

billy_a

totally agree im not giving up a good standard of living, unfortunately the pay for engineers in the UK isnt so great, im on the upper limit of the pay scale and realistically could get to around £3200/month (net pay) if I move up a grade to Lead/management level after which im sure there wont be any big increases again as im still fairly young.

civilservant

$7,000 a month in Texas should be able to afford you a decent, but not 'rich', standard of living. I don't have any direct knowledge of property prices there, but property in the US overall has skyrocketed since the pandemic, so that is likely to be the largest single expense.

I agree with this - but make sure your wife is fully aware of what this entails, since many would not want to consider years of not being able to work.

Rete

In regards to the HSA or FSA, you are the one that designates how much is taken from your salary to be saved for uncovered medical expenses. The monies taken out are before taxes so that lowers your tax bill somewhat. The problem with some of those plans is that the monies must be used by the end of the year or they are lost. And yet there are some that will let the monies accumulate yearly.

My apologies to those that answered before I posted this morning

My daughter in NY had self insured through her husband's firm. Their annual deduction before healthcare kicked in was $6,500. They were mandated to pay $1,200 per month into the HSA to meet this deductible. That's a large chunk of money for a lower middle class white collar salary. Well, that's their story but it is not necessarily every self insured person's. Fortunately, she now works full time for a school and they have changed healthcare plans and are living easier because of better coverage and lower deductible.

Will you be offered dental? Prescription? Eye Glasses? What is the charge for that or is it included with the healthcare plan?

Not all companies offer pensions. They will offer a 401K plan that you fund with a percentage of your income. The monies are taken from you before taxes so it also will lower your tax bracket.