Working in U.S. - taxes and other stuff one needs to know?

[binTravkin]

Friend has an opportunity to go there, so he (and me too ) is curious as to what is the common practice with:

- taxes (who - employee/employer pays what and perhaps some samples with abstract numbers)
- vacations (how much days per year minimum by law)
- business/work trips (financial side)
- any other things about financial issues one must know

in U.S.
The opportunity position is senior Web developer if that helps.

Thanks.

[Arrian]

Income tax will be deducted out of your pay check automatically. The % depends on how much you make. If you want a ballpark figure, I'd say 25%.

Other taxes include sales tax and property taxes. These will vary by state (in CT, sales tax is 6%. There are exceptions for "essentials" of course).

For a salaried (non-hourly) position, 2 weeks (10 days) of vacation time is standard to start (entry-level, anyway). One could get more if one is experienced.

Business trips/expenses will vary by company... what exactly are you asking about? The company should pay for travel expenses, hotel, and reasonable food costs. Each company will have some sort of policy on expense reporting.

-Arrian

[PLATO]

Originally posted by Arrian
Income tax will be deducted out of your pay check automatically. The % depends on how much you make. If you want a ballpark figure, I'd say 25%.

Could be as little as 20% or as much as 30%...so 25% should be pretty close. In addition, many States have an income tax withholding as well that could run from 2-5%

Originally posted by Arrian
Other taxes include sales tax and property taxes. These will vary by state (in CT, sales tax is 6%. There are exceptions for "essentials" of course).

These vary widely as they are "local" taxes. Some jurisdictions will tax your personal property...some won't. Sales tax is present almost everywhere and varies widely by State and even municipality. Expect to pay between 3% and 9.5% depending on where you are.

Originally posted by Arrian
For a salaried (non-hourly) position, 2 weeks (10 days) of vacation time is standard to start (entry-level, anyway). One could get more if one is experienced.

There is no law requiring any vacation time. This is given as a benefit by the company to entice workers to work for them. It has become traditionally standard for two weeks to be given. Depending on your skill set or education level, it could be less or more depending on the type position you get. Many labor positions will get one week per year (non unionized of course!). Very, very few employers will offer no vacation time.

Originally posted by Arrian
Business trips/expenses will vary by company... what exactly are you asking about? The company should pay for travel expenses, hotel, and reasonable food costs. Each company will have some sort of policy on expense reporting.

Companies will generally pay what current Tax law allows them to write off. Arrian has got it right on the money. The one exception is that, if you are on your own for lunch (i.e. not in a meeting where it is supplied), then that will generally not be reimbursed.

Many companies will have limits set on what you can spend for each covered meal period...most will pay anything that is reasonable. A few companies provide a "per diem" amount that you can spend or not...anything less and the difference is yours...anything more and the responsibiliy to pay it is also yours. The "per diem" arrangement is fairly rare however.

Most businesses will require original reciepts to be filed with an expense report in order to obtain reimbursement.

[DanS]

In addition to the federal income taxes (up to 33% of income, graduated according to income) and state income taxes (which sometimes run as high as 3/5ths of the federal income taxes), there are payroll taxes that run ~ 8% of income. All of these taxes will be deducted from his paycheck.

[binTravkin]

That's a whole lot of taxes -
33% + 0.6*33% + 8% = 60.8% max!

Anyways, thanks for info, came in handy.


Just for reference in Latvia we have a law which dictates that a person is eligible of 4 weeks of vacation per year, 2 of which may not be postponed and at least 2 of which must come in one piece (like 2+ week vacation).
The taxes are quite uniform and go like this
25% income tax, 24.09% (or less depending on how many persons you upkeep and whether you are invalidated) social tax for employer and 9% (or less for same reason) employee social tax.

[DanS]

Yes, but you never get to 60.8% max because there are standard deductions from your income before calculating the tax. Also, the 8% payroll taxes (social tax, employee share) does not apply against income above $102,000. Lastly, these are marginal rates, and the 33% in federal income tax only applies for that amount earned above $97,925.

F.e., a person making $100,000 will pay roughly 20% in federal income taxes, ~ 8% in payroll taxes, and whatever state income taxes that his state charges.

There is also an ~ 8% employer share payroll tax, which compares very favorably to your 24.09% employer share.

Edit: Oops! There's a 35% federal income tax bracket for those making $174,850 and above. My bad.

[Zkribbler]

The big question you should be asking is health care.

Unlike other industialized nations, the US government does not provide health care. Sometimes, the employer offers health insurance. Often they do not. If they do, usually the employee has to pony up some of the premiums, and then face deductable and co-pays.

[Arrian]

Given the job he's talking about, Zkrib, his friend will get company healthcare. But anyway, yeah, that is a good question that should be on the list.

I can use my costs to give you a ballpark...

~$50/month for medical. Basic office visits incur a $15 copay. Specialists are $25 per visit. There will be some limitations (caps on visits to particular types of care, perhaps, some things not covered if they are deemed experimental, etc).

~$6/month for dental. There is a copay ($15 or 25, I don't remember) and certain work is not fully covered. If you have major dental work done, you may have to cover as much as half of it yourself.

I opted against the vision plan because it's crap and I can do better just by putting money in my healthcare flexible spending account (pre-tax).

-Arrian