The Top #5 Tax saving tips from your new job as an NRI in the US

The Top #5 Tax saving tips from your new job as an NRI in the US

by | Aug 23, 2019 | global income tax, NRI, tax deductions, tax rate, tax return, tax savings tips, taxes

The Top #5 Tax saving tips from your new job as an NRI in the US

If you are an NRI working in the US, you will need to pay taxes in US and you will be considered as a Resident alien with respect to tax purposes in US. You will be liable to pay taxes in US if you are a green card holder or you were present in US for a total period of 183 days i.e. you can count on the actual number of days you were present in US in the current year i.e. it should be at least 31 days , one-third of the number of days you have been in US in the first year preceding the present year and one-sixth of the number of days you were present in US in the second year preceding the present year. This is known as the Substantial Presence Test (SPT) used by the IRS to find out your liability to pay tax in US. Tax saving tips from your new job as an NRI in the US

Types of taxes to be paid by an NRI in US

Let us have a look at the types of taxes NRIs need to pay in the US.

  • Social Security Tax

Social Security Tax is to be paid by every individual who is working in the US. Half of the amount will be contributed by your employer in US and the other half is given by yourself. 6.2% of your gross salary would be deducted as your contribution to Social Security Tax.

  • Federal Income Tax

Since you are a non-resident in US you will have to pay tax on all income earned in the US without any deductions that the US citizens can avail. However, if you are availing the deductions which the US citizens are enjoying you will have to pay tax on the income earned outside the US as well.

  • State Income Tax

You will have to pay State Income Tax based on the state of the US in which you are working

  • Medicare Tax

This tax is paid by you for the health care services which will be availed by you after your retirement and is irrespective of the fact if you would be in the country then to avail them or not.  You and your employer will have to contribute 1.45% of your gross salary for this purpose.

  • Global Income Tax

Any dividend obtained by you on shares and mutual funds in India are to be taxed in the US.  Moreover, this rule of taxation is also applicable to any agricultural income and capital gains obtained in India. A foreign tax credit in your US tax return can be claimed by you, in case of tax payment done for the above-mentioned income sources. Form 8938 (Statement of Specified Foreign Financial Assets) and

Form 8621(Passive Foreign Investment Company) can be filed along with the US Tax return for this purpose.

Tax Saving Tips for NRI in new jobs in the US

Some of the tax-saving tips for NRI working in new jobs in US are mentioned below.

  • Form W-2 must be present with you

This form is a major document required while filing your US tax returns. You can obtain this form from your employer and it will contain details related to your annual payroll. You should collect your Form W-2 from each employer for whom you have worked in a particular year.

  • Spousal exemption to be claimed and declaration of dependents

An important tax-saving method is by claiming a spousal exemption. For this, you will have to file Form W-7 and apply for an ITIN i.e. Income Tax Identification Number.

While filing for US tax returns, you can declare your dependents even if they are residing in India. However, there are certain laws by which they will have to qualify as your dependents.

  • Declaration of all financial interest

You will have to submit Form TD 90-22.1 in case of having financial accounts outside US with a value of the accounts exceeding $10,000 on a yearly basis.

  • Medical deductions should be claimed

You can claim your medical deductions by filing Form 1040; Schedule A in case of your medical expenses exceeding 7.5% of your Adjusted Gross Income.

  • Make investments or take mortgage loans

You can make investments into retirement schemes, stocks or fixed deposits to save taxes. Also, you can save taxes by taking mortgage loans or by making donations.

Since you are an NRI and new at your job, your income in the US would be reduced up to a large extent due to the payment of taxes. However, these tax-saving tips will help you in reducing your tax liabilities up to some extent.

Tax Saving Tips for Contractual and Project Based Employees

Tax Saving Tips for Contractual and Project Based Employees

by | Mar 3, 2018 | Deduction & Credits, Tax Planning

Tax Saving Tips for Contractual

and Project Based Employees

 Tax Saving Tips,Being a contractual or project based employee has quite a few benefits when it comes to taxes. For an instance, you are eligible for a few tax deductions without even having to itemize the same. The following are some great ways of saving money on tax dollars if you a contract and/or project based employee.

Include Business Expenses

A lot of contract employees either shy away or are too skeptical when it comes to deducting business expenses from their returns.As a project based or contract employee, it is imperative that you keep a track of all your earnings throughout a year. If you can manage, having separate cards and accounts for business and personal usage would be ideal.

Any expenses that you pick up as part of your job, you can deduct the same. However, it must be required by your business or job profile and not any made up costs. A lot of contractual employees forget to do the same and end up paying more taxes than they should ideally pay.

For example, you can deduct mileage spent for work related travels or pay up internet bills if you use the connection only for work. The same also works for business related travels or meals.If you spend money on marketing research or coaching, you can deduct those as well.

Health Insurance

Getting a health insurance while you are a contract based or project based employee is a win-win situation for you. Firstly, you create a shield for yourself when it comes to medical expenses. Secondly, you can deduct the premium amounts from your net income; thus, reducing your tax liability. You can make use of health savings accounts as well to reduce your tax liability.

Be Organized

It might sound a bit silly, but trust us it is not. If you keep a track of all your earnings and expenses on a regular basis, it just irons out the tax filing process. A step as simple as keeping all tax related paperwork in a folder from the beginning of the year is helpful. It will ensure you do not lose hairs due to stress at year end while doing taxes. Also, reviewing the same on a regular basis will give provide you with better opportunities to save taxes as and when you can?

Retirement Plan

This is one of the easiest ways by which you can save money on taxes and yet secure a good future. Setting up a retirement fund allows you to save taxes. The money that you invest in such funds also grows tax free, provided you do not withdraw the same before the anticipated time. You can check if your employer provides with any such benefits, as they get to save taxes under the same pretext.

File On Time

This is another of those seemingly easy things to do, that a lot of us miss out on. Not filing the taxes on time is something that you must avoid at all costs. It just doesn’t make sense to pay taxes and fines for late filing on the top of it. Being organized from the beginning of the year would ensure an easier tax filing season.

Of course, there are emergencies and other work which need higher attention to be paid. If you anticipate any such things, it is better to go with an extension of tax filing. It will give you additional time to file your taxes.

Being aware of your tax liability helps you, as you know where you can save some of your hard earned money.