[Sleuth]

For you Americans out there, tax equalization--good or bad thing?
Since 2000 my tax rates have been running around 13-14% (of Federal adjusted gross), or around 18% when you throw in the state taxes. My family consists of me, my wife and a single child.
Any idea how the oft-mentioned AMT plays in this?
I have seen this subject in a few threads, but the answers always seem to be based on European/Aussie tax rates and the answer must be different depending on country/tax rates.

[jaetee]

I thought US tax rates were closer to 40%, how are yours that low? If they are that low, then there really isnt a difference versus HK taxes.

[Sleuth]

US tax rates start out high (but I don't think they hit 40%), and then you start the "game" of deductions and credits. Take out your mortgage interest, your charitable deductions, your personal deductions for family members, etc... and you end up quite a bit lower. The US tax code is hideously complex and there is probably some truth to the more you have, the less you pay when you express it as a percentage of total income. Until you start to reach a really low level of income which then becomes exempt from taxes.

[dizzyhytes]

Hi Sleuth

This is slightly off topic (ie not on equalization) but how does it work for a US person to come to work in HK. I understand that they will get double-taxed because there is no double tax treaty. Doesn't the US person end up paying literally half his salary in taxes then?

Thanks...dizzy

[stephinpdx]

I'd say not to get tax equalization.... i have it and wish I didn't. Especially as we sold our home and can't get equalized with deductions on our mortgage, donations of used goods, etc anymore. HK taxes are so low I'd prefer to pay that over US ones. Just my two cents

[KnowItAll]

dizzyhytes : I'd start here...

http://www.irs.gov/faqs/faq13.html

[Sleuth]

dizzyhytes,

Unfortuinately I am not an international tax expert so KIA's link might be best. The idea behind tax equalization is to keep me from paying any more (or less) than I would have paid in the US. Not sure how (or if) this really works.

stephinpdx--would your answer change if you were paying mainland China taxes, rather then HK taxes? I was informed yesterday that, since the office will be in Shenzen, HK will not do the taxing. Eventually I will have a meeting with the tax people, I just need to have a basic understanding of what I will be talking tothem about. Otherwise I just have to take their word for everything.

[jlongboard]

Dizzy I'm just as confused as you are about this tax thing. I just got here a month ago. I know I have to do my US taxes this year since i was in the military. But I plan on living here. I looked at KIA's link and it looks like we can get some kind of break but i'm going to call the consulate and find out from some one there. I dont see why we would have to do this twice in one year. I'll post again in a day or two after I find out.

[Sleuth]

Dizzy,

If you have any general questions, I could ask the accountants when I have my tax meeting with them. Any general question you had would probably apply to me also so it should be easy to get some answers. Now, US tax law being what it is, I am not sure anyone will understand the answers.

[ohchk2001]

My U.S. based CPA told me I can deduct up to something like $80,000 from my income taxes if I live Hong Kong or anywhere overseas for that matter. Anything over 80k I need to pay income tax on.

Despite the $80k "break" you still have to file your income taxes.

Talk to a CPA.

Edit: Also you can play the deduction game in Hong Kong too, especially if you happen to run a business. So your taxes in HK would end up much lower especially if you are a high income earner. Plus don't forget social security, that takes a huge bite from your wallet too, and I treat it like an income tax since it isn't a "lockbox" savings account like the MPF is.