A Guide on U.S. Taxes for Those Who Consider Immigration to the USA

Having received a green card, a new resident automatically becomes a tax resident. US citizens and permanent residents are taxed on their worldwide income, regardless of where they live, where the income comes from, and how much profit they make – US income tax is mandatory for everyone. 

This means that there is an obligation to pay income taxes on everything, including non-resident alien gift tax. Any financial assets in the US may be subject to tax inquiries and requirements to mention them in the reporting. 

The US tax does not only apply to citizens and green card holders. Anyone who passes the substantial status test becomes a tax resident. Taxes largely depend on each state’s legislation. Below are the main taxes you will have to pay if you move to the USA as a citizen and entrepreneur. 

US Income tax (Corporate Income Tax)

The amount of this tax primarily depends on the type of company. So, S-corporations do not pay this tax on their own behalf. All income, losses, and, accordingly, taxes are divided between the participants of such a corporation.

C-corporations pay federal income tax in America, and regional tax, which differs from state to state.

An LLC company can be treated by the tax system both as an S-company and as a C-corporation.

This tax is progressive, that is, its size increases in steps, depending on the size of gross income. For the first $50,000 of income, the company pays at a rate of 15%, for the next $25,000 – 25%, for another $25,000 – 34%, for receiving more than $235,000 of income – at a rate of 39%. Income that exceeds $335,000 is subject to 34% income tax.

Sales Tax

This is the American equivalent of VAT (Value Added Tax). It is taken into account in the cost of the goods, respectively paid by the buyer. Currently, a regional sales tax exists in 45 states and the District of Columbia. Local sales tax is levied in 38 states. This tax rate in the US varies; the maximum is 10.02%.

Income Tax

Speaking about what taxes Americans pay, one cannot fail to mention the most basic one – income tax. The average US income tax ranges from 10% to 39.6%. US income tax is paid on:

  • wages;
  • premiums;
  • bonus payments;
  • compensation payments;
  • dividends;
  • rental income;
  • percent of capital ownership;
  • income from the sale of real estate, land, corp. rights;
  • income received from self-employment.

But at the same time, taxes in the United States for individuals provide for an unconditional non-taxable minimum income – not a dollar is ever paid from it under any circumstances. The size of this minimum depends on many different social factors.

The US personal income tax requires that a tax return be filed annually, starting on January 1st. The filing deadline is April 15, which is the last day of the US tax period. The declaration is either sent by mail or submitted electronically. In the latter case, you can use one of the web services that simplify tax calculations. 

Deductions for Social and Medical Security

All US tax residents are also required to pay payroll taxes, which are divided into two types of deductions: social and medical.

The first is also called the social security tax. The rate of this tax is 12.4% of the salary fund. The proceeds from this tax go to the social fund.

The second is also called Medicare. The rate of this tax is 2.9% of the salary fund. The funds paid under this tax go to the medical fund.

Half of the amount of these taxes is paid by the employer, and the other half by the employee. At the same time, when calculating the deduction for social security, remember that the rate of this tax takes into account only a certain salary limit. All money above this figure is not taxed.

Self-Employment Tax

Also known as the self-employment tax. It is paid by small business owners, contractors, and, of course, freelancers. In fact, this tax is an analog of social and medical contributions combined, and even the rates here are exactly the same.

This tax is paid by any self-employed person whose income is more than $400 per month.

US Dividend Tax

With this type of taxes, at first glance, everything is simple – for the most part, they are taxed as part of income tax (that is, according to the corresponding declaration) at a rate of up to 37%. 

However, it is possible to get reduced rates on this tax but only so-called “qualified dividends” can claim such a benefit. For example, dividends of companies whose shares are freely traded on major stock exchanges in the United States. It is possible not to pay tax on dividends at all if additional shares were issued by a resident to receive them. When these shares are added to a portfolio of securities, no tax is paid on them. When selling such shares, you will have to pay income tax.

US dividend tax for non-residents is slightly different. According to the law, it is paid at the end of the year at a rate of 30%.

Property Taxes

Property taxes in the US are paid at the regional and state levels. The rates, subtypes of the tax, and the rules for its payment may differ significantly not only from state to state but even within the same state. But three key types of this tax are distinguished:

  • Property sales tax: in the US, the seller of real estate must pay it after the purchase/sale transaction. The approximate amount of tax is estimated based on the estimated value of the sold object.
  • Property ownership tax: In America, it is paid once a year for all real estate, including the land that is owned. The rate of this tax is set by the authorities of the particular state in which the property is located.
  • Capital Gains Tax: This type of real estate tax in America is paid when a property is sold. Its rate is calculated from the difference in the value of the object at the initial purchase and the current resale.

US real estate taxes for non-residents mainly play a role for commercial properties that make a profit, as well as for the sale of properties.

The tax on an apartment in America is the same as on a house, and the rate is calculated according to the same factors.

Gift Tax

This tax is imposed on the transfer of property on a gratuitous basis. Anything can be such property – from cash to a share in the company. The rate for this tax is rather high – it can even reach up to 40% (!) But paying for it is not necessary.

The fact is that during the year a person can make tax-free gifts in the amount of up to $ 15,000. In addition, the legislation provides for another non-taxable amount – 11.4 million US dollars during life. That is, by making a gift worth $ 100,000, 15,000 of it will be considered an annual non-taxable minimum, and another 85,000 can be credited to the lifetime non-taxable limit – the main thing is to fill out the appropriate tax return correctly.

Excise Tax

Excises in the United States are paid at two levels – federal and state. At the federal level, tobacco products are subject to excise taxes. At the state level, the excise tax is levied on the sale of fuel and liquor. You also need to remember that the number of different types of this tax in the States is growing. For example, some states excise e-liquid, and even legalized marijuana.

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