Nanna Moon

Hello.

I know this may be a sensitive issue to discuss, and please excuse my complete ignorance on this matter! I'm a new-graduate in the UK that will shortly be moving to the Detroit area, and could really do with some advice on the levels of taxation on income / what the various forms of US taxation actually are.

I've been given my annual / base monthly salary figures my the future employer.... but it's now imperative that I can understand how much of my annual income I'll have left over after taxation.

I can of course ask my employer for this info, but I thought it best to post here initially, as you guys will no-doubt have a wider understanding of all the various facets of US taxation (both income and non-income related).

1. What are the main forms of US taxation to be aware of - both on income and/or any other forms of tax (e.g. council tax or equivalent) that will need taking into account?

2. I've also just come across the term 'Federal Withholding' but simply do not understand what this is / how it works!

Again, please excuse my ignorance on this matter. Any help or advice would be greatly appreciated.

Thanks very much,

Leon

NC Penguin

You'll be wanting to read the IRS (Federal tax) website and the Michigan state tax department's website.

There might even be some kind of calculator for take home pay on the state website.



NC Penguin

BritGuyTN

In simple terms

1. federal tax - universal across the usa - check www.irs.gov. federal withholding is just the amount that is kept by the employer to pay the goverment - like PAYE in the UK. sometimes they don;t take enough and you have to pay up at tax time - everyone in the UK has to file a return in the way that self assessment tax payers in the UK do every year
2. State income tax - varies by state - 3.9 % in detroit flat rate
3. State Sales tax - 6% in Michigan
4. Property tax (council tax) - varies by each state and county

Nanna Moon

Thanks for your help there guys, that's certainly started to make things a little clearer. It's pretty tricky at first when you don't understand how the system works.

Just to clarify, is federal taxation completely separate from state taxation, when tyring to calculate how much will be deducted from annual salary, or do they exist as the same thing - e.g. a certain percentage of the federal tax makes up the state taxation?


Thanks again for your help there.

Leon

BritGuyTN

separate

Bob

Your UK student loans won't make any difference as a tax discount over here either....but on the plus side, you've got to be earning a hefty wedge before you have to pay it back anyway

Other things you need to think about is high cost of medical and car insurance, especially credit as you won't have any credit history when you start out, so first couple years will be a bit more pricey.

Nanna Moon

Separate -- Thanks for letting me know Britguy.

Aaar, student loans.. yeeer! As I understand, repayments will start off next may/june time... still need to chase that one up tbh.

Luckily many things like healthcare are covered by the employer (GM), so that's gonna help to some extent. Car / ins is also available through them at discount... but things will still be pretty tight for some time.

BOB - You may remember our conversations some time back on the VISA section? I was trying to find out if my girlfriend could come across on a visitor visa? As things stand, embassy interviews (double appointment) are booked for mid sept. We went to London a couple of weeks back (for her interview)... after spending precious money on trains, B&B, travel, food and so on (and having followed detailed advice from the embassy VISA helpline), she arrived there only to be told that there was no way she could have an interview without me also being present - despite their helpline saying on numerous occasions that there was no way of us both having an appointment together!

There guy at the embassy's comment about the visa advice line was:

"They don't really know what they're talking about to be honest, and they're not up to date with information! Just phone them back and insist that you need a dual appointment... if they refuse, keep insisting until they agree to give you one".... Surely that's a bit weird... isn't it?

Thanks everyone,

Leon

Bob

You only pay 9% on over whatever the level is now, I think either £10-15K...and if your abroad, you'll have to let them know, there pretty good about it, but easier to sort out in advance...so it's really not that much...I still haven't started paying mine off, but then again I haven't gotten past the threshold for earnings

Nanna Moon

Aaar, that's not too bad then... but yet another dent in the wallet all the same! It's a shame, as people had always said the loan repayment cease (regardless of salary) for the duration of time your out of the UK... typically, it's now clear that that's not true! Bugger!

Anyways, I think they still get wiped after around 7-9 years (cant remember the exact figure) if your still out of the country and haven't met the threshold for earnings / or alternatively, the remaining amount that you haven't yet repaid after 7-9 gets wiped... may be worth looking in to (not that I'm encouraging it, lol ).

Got that info off the SLC website a few months back, so it probably still holds true.

Thanks Bob

Bob

I thought it got wiped when you hit 50 years old....but either way, if your not on the PAYE system, you'll have to pay them yourself, but they will allow you to pay off the chunk annually rather than monthly because of bank transfer fee's etc, and if it ends up being more than what it should be, they can refund the excess, not that there's any point.

Drebin

Yeah, it's definitely not as short as 7-9 years. It's aged 50-65 IIRC that it's 'wiped off'.

The PAYE thing isn't quite solid either, I graduated in 2001 and have never paid a penny back of my £2k student loan, whilst earning over the threshold. I'm happy (at the moment) for it to sit there waiting for a more opportune time to pay it off.

dbj1000

Actually the interest portion of your Student Loan will be deductible from your US taxable salary, once you're resident in the US (for tax purposes).

Similarly, in the first year you're here you'll be able to deduct any Council Tax and/or Mortgage interest that you paid in the UK during the first part of the tax year.

A question though: what relocation package are GM offering? I ask because if the relocation package isn't good it can cost you an absolute fortune in out-of-pocket expenses to relocate, and most of those expenses are not tax deductible.

Bob

really? that's handy to know...the muppet in the irs office in Bangor told me I couldn't claim it unless it was a US student loan I'd taken out for studies in the UK.

dbj1000

It may be down to a difference of opinion or a grey area in the rules. I don't have direct experience of deducting interest on a student loan, but certainly my CPA was of the opinion that we could deduct it if I had any.

Bob

Well I'll give it a go next year and see what happens