Tracym

There is a tax deduction for each child here.
If an elderly parent is actually dependant, I think (but am not certain) they too can be claimed as a dependant.

I feel I get things for my taxes, sorry you don't (not meant sarcastically).

kins

At the current exchange rate my husband earns the same here as he did in the UK last year.

Tax, medicare tax, social security, and health insurance are all deducted from his pay. What he brings home per month after those deductions is almost exactly the same as what he used to bring home in the UK after he'd paid tax and NI.

So in our case the taxes are similar when you take health insurance into account. But we get shafted on health insurance and I think most people get a better deal than us.

As a married couple with one income filing jointly here we get better tax allowances than we did under the UK tax system.

In terms of other tax... I don't know how you calculate that to compare one country with another. We spend much more on property tax here than we did in the UK, but less on sales tax for example.

Steerpike

My point was, you are NOT having to contribute to the UK system while here, but presumably when you go back to the UK, you will still get both medical and retirement benefits, so you are getting a free ride on the UK system, so while your US contributions are money down the drain, you will be getting a benefit over there you didn't directly contribute towards.

This is simply incorrect - you omit a very important point! The tax rates I quoted above in the US were for SINGLE filers only! The exact same amount of income, when filing jointly, is taxed at a lower rate. Or, put another way, you have to earn way more income in order to pay the same rate of tax if you file jointly. Looking at the figures below, the State Tax figures are 100% symmetrical and fair; the Federal Tax figures are not symmetrical and there is a 'marriage penalty' but it's not huge (see bottom of post for all levels).

Federal tax, SINGLE: 28% of the amount over $74k
Federal tax, JOINT : 28% of the amount over $124k

State tax, SINGLE: 9.3% of the amount over $43k
State tax, JOINT: 9.3% of the amount over $86k

Regarding "And no flicking personal allowance for me either...",
Line 42 (deductions) of the Federal Tax 1040 says "...multiply $3,300 by the total number of exemptions claimed on line 6d". Line 6d is essentially the total number of people in the household; in your case, 2. So you are getting exactly double the standard deduction that a single person gets.

But in the US, you have the choice to file as an individual also, as everyone else has pointed out. You have come to the conclusion that if you were to do that (that which you think is fairer), you would pay even more tax, so you don't do it. So criticise it because you don't like the outcome, not because it's not fair.

I agree in principle, but even on (what I consider to be) my high salary I've never had to pay it. I don't believe in worrying about things that aren't likey to apply to me.

My biggest question never got answered. If you picked up and moved back to UK tomorrow, and setup your same private business there, would you have more money or less at the end of the day, money left over to spend on vacations, etc?

For reference, here are the fed tax tables for single and joint filing (2006):
Single:
Joint:
And here's California State:

Single:
Joint:

Giantaxe

There may be a marriage penalty. However, what often happens when there is a large discrepancy between the income of the two people, is that the lower-incomed individual isn't able to make full use of deductions for things like mortgage interest and property taxes (typically divided equally between the two people) either because the individual's income is too low or has a lower marginal tax rate than they would if they filed jointly and all the deductions could be applied to income that would otherwise be taxed at their combined income's higher marginal rate. In other words, filing jointly often allows maximization of the "value" of deductions.

lapin_windstar

Not exactly - you don't qualify for retirement benefits if you haven't paid into the system. At the same time, the payments required are relatively small and so are the ultimate benefits.

Bob

but you can only qualify for personal contributions if you've worked for 3 years before leaving the UK...

Steerpike

To further address Elvira's comment: "And no flicking personal allowance for me either...", I looked at federal form 1040 in more detail.

Line 40 (standard deduction, which is what you use if you don't itemize) says "Standard Deduction ... Single or Married filing separately, $5,150. Married filing jointly ... $10,300" - Exactly double the allowance for a joint filing.

Line 42 (Exemptions) says: "multiply $3,300 by the total number of exemptions claimed on line 6d" where line 6d is 1 for a single person, 2 for a married couple filing jointly (and here you add in any children too) - Exactly double the exemption for a joint filing.

I just did a sample, simple run on fed tax for two people each earning $50k and filing separately (filing as single);
Each person has this result:

Income: 50,000
Line 40, standard deduction: 5,150
Line 42, exemptions: 3,300
Line 43, taxable income: 41,550
Tax for this income (lookup): 6,945

The same approach for a couple, with combined income of $100k, filing jointly, comes out as:
Income: 100,000
Line 40, standard deduction: 10,300
Line 42, exemptions: 6,600
Line 43, taxable income: 83,100
Tax for this income (lookup): 13,890

The tax due - 13,890 is EXACTLY double the amount each single filer pays if filing as single.

If you now consider two people earning $75k, each filing as single, compared to a couple filing jointly with combined income of $150k, the end figures are:
single (each): $13,195 joint: $26,672 - joint being higher by about $280 due to the 'marriage penalty' - not exactly a big deal.

If you now consider two people each earning $100k, each filing as single, compared to a couple filing jointly with combined income of $200k:
single (each): $19,965 joint: $40,672 - joint being higher by about $742.

So even at $200k income, the 'penalty' for filing jointly vs. singly is only $742 - not something that is going to break the bank for a couple making $200k.

I wonder if you've been getting bad advice or have been incorrectly filing your taxes? I've been doing my own taxes (with the help of Mr. TurboTax) for 20 years or so and I'm 99.999% confident in my analysis here.

Elvira

All I know is that once I add up federal, state and Medicare, I am paying 52% of every $ I earn in taxes. I have no reason to believe that my accountant is incompetent.

Tracym

A more meaningful percentage would be the percent for you and your husband together.

Because as I remember, you count it as if he gets all the deductions. So "just" yours is not really representative.

Elvira

I realise it is not representative as far as the US situation is concerned.

But if I compare it with the situation I would be in if I were still in the UK, it really stinks.

The whole point of this thread is UK tax compared to US tax. Some people seem to be under the illusion that they would be paying less tax in the US than in the UK. My point is that *I* have not found this to be the case. Far from it.

YMMV.

Giantaxe

No, you are not. You are choosing to file jointly and thus claiming that it's all your personal income that is being taxed at you and your husband's combined marginal rate is illogical. One could just as plausibly argue that some or all of your income isn't being taxed at all because married filing joint allows you $15,650 of income that is tax free. When you file jointly, the only thing that's interesting is what your "blended" tax rate is between the two of you (and how this compares to what it would be if you were taxed as two individuals). Remember, you are sharing all the deductions that you are entitled to; they are not all "his". And, of course, you have the option of filing separately.

Giantaxe

The problem is you haven't produced an argument to back up this statement. I'm all ears.

Tracym

Well I agree with YMMV for sure.

But mightn't your husband be paying less? With all the deductions?

High income and self-employed (unless you can find a bunch of business deductions) is probably the worst deal for paying taxes. Folks in other situations might very well pay less tax - I don't know.

I guess we do think of married couples as somewhat sharing financially - since usually they jointly share/pay for a home, utilities, etc. So I guess I personally tend to look at the whole picture (husband and wife).

The thing is - like I told a friend of mine, who said she wouldn't live in a particular state, because of some bit about taxes - the point isn't really how much tax you pay. The point is - what standard of living do you end up with? For example, in Michigan I pay 1/2 to 1/3 for groceries than I do here. Houses are 1/2 to 1/3 the price or even less. So even if the tax rate happened to be higher - with the same income I'd sure be better off there.

Not saying it's necessarily the case between the UK and US. But it's possible. there seem to be a number of people (Dunroving for one recently) that say it's more expensive to live in the UK for them.

Now the state you live in - there I certainly sympathise, it's a very expensive place.

As far as the social security - I still can't get my mind around you paying into it for many years, and never being able to claim. If you are/were a dual citizen - US citizens can certainly claim social security abroad... are you sure there's no way to claim - or get some sort of refund if not?

Giantaxe

Is that being claimed? I thought the issue raised was that tax paid for Medicare (1.45% if employee, 2.9% if self-employed) is "lost" if one returns to the UK upon retirement?

Elvira

I am paying 12.3% Medicare tax!!!

Which I will not get anything for because I will *not* be here when I retire...

I will get a UK pension because I am still paying UK NI contributions.

Anyway, this is not getting anywhere........ I am unsubscribing from this thread...