In general, taxes are lower in the United States compared with many other industrialized countries.  Of course generalities are difficult, because there are many different types of taxes in each country.  The actual results for any individual will depend on his/her particular circumstances.

For example however, one can compare the sales tax in U.S. individual states to comparable taxes abroad.   The United States does not have a value added tax (VAT).   An average estimate for sales tax in the U.S. would be around five to seven percent (with some states higher and some lower, but generally a range from five to seven percent, a few being as high as ten).  There are some states that do not have a sales tax at all.  Compare that to the sales tax in many European countries, which currently is often above 17%; that can result in a considerable difference in the cost of living.

There is also a federal income tax in the U.S., which is progressive, increasing with the amount of income.  Currently the range is from 10% to 35% of “taxable” income (with the 35% taxation rate only applying to “taxable” income exceeding $373,500 for husband and wife filing a “joint” income tax return).   There are many deductions available to reduce “taxable” income – please see below.  Individuals investing in certain State and Municipal securities are completely free of federal income tax on the interest earned.  Capital gains are subject to a maximum federal tax rate of 15% on many types of property held for more than 12 months.   Many States have an additional small State income tax.  Other taxes may apply depending on your situation.

For individuals who are taxable in two countries, with good planning there is usually no “double tax”.   This result can stem from the domestic law of each country, which usually allows for “foreign tax credits”, and also from tax treaties when they exist between the two countries.

In the United States there are a number of potential tax deductions, and other advantages that can be exercised to reduce personal income tax obligations (i.e. to reduce “taxable” income).  Among others these can include, depending upon the circumstances, a deduction for charitable donations, home mortgage interest, investment interest, investment counseling expense, property taxes, local taxes, State sales tax, and (in certain circumstances) medical expenditures including medical insurance premiums.

Tax benefits and tax credits are potentially available for dependent expenses, child care expenses, education expenses and various other payments, including even payments for certain home “energy efficient” purchases.

Please be well advised that this article briefly summarizes only a few of the many tax issues that will apply to you as a permanent resident of the United States, and is mainly presented as an example of the tax advantages that may be yours, with the potential to result in further reducing the cost of living as compared to your home country.  Tax liabilities are a highly individualized topic, and no two portfolios will ever look the same.  It is imperative that you seek competent professional advice, such as from a Certified Public Accountant tax attorney, or other tax advisor, to determine your own obligations and potential benefits.

The above information is provided by expert international accountant S. L. Richard Brunton, CPA The Brunton-McCarthy CPA Firm, Chartered