A fair few people have asked me about relocating to the US from Australia, so I figured it was time to do a little write up. Specifically the question I want to consider here is “how much do I need to earn to live in the US?”. I didn’t really know the answer to that when I moved, and simply moved in the faith that I would be able to afford to live. At the time it was stressful, but it’s all worked out for the best. So, let’s try to answer that question…
What visa are you going to be on when you live in the US? There are three main versions that I can think of off the top of my head. There is the E-3, which is what I am on, which allows your spouse to work if he wants, but is only open to Australian citizens. There is the H-1B, which is open to citizens of all nations, but doesn’t let your spouse work. Then there are the L “internal skills transfer” visas, which I believe don’t let your spouse work, but I could be wrong on that one. To be eligible, the move needs to be inside your current employer, and you need to have worked for hat employer for more than 12 months.
For all of these you need a sponsoring US employer. They don’t just let people wander in. Generally if you’re going to a new employer it will be an E-3 or an H-1B, if you’re moving to another office of an existing employer, it might be an L visa.
There are some other issues to take into account with these visas. First, E-3 and H-1B visas require that you have completed a “four year technical degree”, or have equivalent experience. I have such a degree, but Andrew who moved at the same time did not and he was able to argue that his work experience was the equivalent. So, it’s not a show stopper, but it might be a problem for you. Now, the judge of the experience test is the guy you talk to at the US Consulate when you apply for the visa, so be sure to be nice to him or her. They have good bullshit filters too, so don’t bother. I watched four people get bounced while waiting in line at the consulate for my appointment, and all of them were because they were visibly bullshitting when they applied for the visa.
Oh, Andrew has some pretty interesting posts on moving to the US as well, so checkout that link above.
Now, the L visas don’t have the degree test to my knowledge, but you need to be transferring within one company, and that company needs to have invested over a certain amount of money in the US to be eligible, so they’re not open to everyone. They were available to my former employer though, and we have only spent a couple of million in the US, so I don’t think they’re that hard to get.
Only the H-1B has a permanent immigration option by the way. It is possible to convert from an E-3 to an H-1B, but I understand that it can be expensive.
Marital status and number of children
Are you married? Do you have kids? I ask because this affects your federal tax rate. When you start working you will calculate your W-4 withholding number, which is a lot like the pay as you earn (PAYE) system in Australia. The amount they hold back from your pays to cover tax will vary based on your status in the family stakes though, so I am paying less withholding because of being married with two kids than a single person would. Also, if your spouse works, then the withholding rate will go up, as you can no longer file jointly. Checkout the IRS withholding calculator for some assistance with working out your likely W-4 number.
Which state are you planning on living in?
There is also state tax, which is also withheld. Now in California this is a flat 9.something percent, and is withheld from my pay check in the same way as the federal tax. There are some concessions for low income earners, but assume that you’re not going to get them. Also, there are other taxes that can be taken out, for example the federal Social Security payment (despite the fact that you can’t claim Social Security ever), and things like state disability cover. Your destination state should have a web page which explains state tax.
401k / superannuation
There is no such think as compulsory employer superannuation contributions in the US. Some employers will match your contribution up to some (normally quite low) limit though. Oh, and you can contribute 0% if you want, you’ll just be f**ked when you retire, which seems quite common here. Now, this matters because your 401k contributions are pre tax, and therefore lower your tax rate.
Flexible spending accounts
Even better, some employers let you have flexible spending accounts, which means that they take some of your money (you nominate the amount), and buy things you want for you with the money. This avoids paying any tax on that money. This is normally limited to things like medical care, public transport and so forth. There are probably rules here, but I don’t know them.
Don’t forget health insurance
Which can be quite expensive, and is pre-tax (I think).
That all affects your tax rate
So, all of those issues affect your tax rate. The worst case tax rate is probably around the 40 or 50 percent mark, and the best case is much more like 10 or 20 percent. The tax rates also vary depending on your income level, so I would recommend that you look into this using the calculators and websites I mentioned above. Also remember that income in Australia while you are in the US is taxed in both countries (I believe). In return I believe that losses can be claimed in both countries from investments, which is why my houses in Australia are negatively geared. Oh, and I don’t have enough money to pay off the loans in Australia either. I am a bit unsure about this because I have never had to file a tax return here.
Also, bear in mind that you get at the very least a standard $10,000 deduction from your taxable income. If your actual deductions are more than that, then you get the higher of the two numbers, but your tax return is more complicated in return. If you plan on owning property, then you should care about the AMT federal tax return system, but that’s really a topic for another day.
Real estate costs
It really depends on where you are. I’m in Silicon Valley, and the average seems to be around $1,700 (two bedroom, shared laundry) to $2,400 (three bedroom, private laundry). It’s a lot cheaper elsewhere. In Portland, Seattle and Phoenix I know you can buy a three bedroom house for less than $400,000 US. I recommend you look into online real estate firms, and especially rent.com.
Cheaper. If you’re not in California, expect there to be left overs, and expect people to want you to take them home. This is definitely true in the Washington DC area, which is where I have experienced it the most. Groceries are cheaper here than in Australia, but those little Australian things like Vegemite are a lot more expensive in return.
Beware the SSN!
You can’t be paid by your US employer until you have an SSN, and these can take up to eight weeks to arrive (mine did). You need to be able to live off savings until it comes through. Worse than that, then they do back pay you, it will be taxed at a higher rate than a normal pay. You’ll get the extra tax back at the end of the tax year (January), but it’s still a hassle. Andrew had a lot of comments on all of that, so checkout the link above.
Credit and banking
You wont be able to get any. Imagine that you’re a teenager, and get over it. Apply for a big Australian credit card before you come over here, just in case you need money instantly. Banking in general sucks about as much as in Australia, although if you agree to direct deposit your pay (why wouldn’t you?) then generally you’ll get fee free banking in return. Checks (cheques that is) take a variable amount of time to clear here, depending on your history with the bank. When I first came here it would take two weeks or so for a check to clear, now it takes a couple of days. Your first pay will probably be a check, so bear this in mind. Perhaps consider writing yourself some small checks early to start developing some clearing history.
Transport, vehicles, gas
If you’re lucky, you’ll have good public transport. Cars are cheaper to buy here, and gas is about half the price, but expect to use more of it per linear unit of travel. There are many online sites which will give you car pricing. Bear in mind that the prices advertised wont include registration (they call it licensing) and sate sales tax. That added an extra 10 percent to the price of my Toyota Sienna here.
Cheaper. But not much. They also appear to be generally all you can eat.
Ringing home to Australia is free, just use Skype or Google Talk. If you must call, it’s pretty easy to get calling cards which cost around 5 cents per minute back to an Australian land line. The rest of US telecoms suck even more than in Australia. Yes, I didn’t know that was possible either until I moved here. Cell phones are the worst thing here, networks have bad coverage and are expensive. For example, Catherine is on a pre paid plan which is costing us about $20 a month, but her phone is terrible. I’ve got a nice Blackberry, but I’m paying around $80 a month for the phone, and it only includes 1300 minutes of talk time (which includes received calls).
Is expensive. It’s a long way. Remember that if the company your visa is tied to terminates your employment, then you have a very short period of time to return home in. You probably need to have a war chest in order to be able to deal with an emergency relocation, or your grandma getting sick.
That’s all I can think of for now. Feel free to ask questions if you have them, and I will do my best to answer them. I could also talk about cable TV, cost of electronics, and other issues, but my brain has melted. Feel free to ask questions if you would like in the comments. Enter a bogus name if you want to be anonymous.
Updates: clarified L visa description. Expanded the banking section.
Updates: mentioned standard deduction and AMT tax return.