I am exploring employment opportunities in US, but am quite confused with the tax situation. I hope you can take time to answer the below questions, and set m off in the right directions as I do more online research.
Sure. Please double check everything, of course, but I’m most probably correct.
Situation:
1. Married with 1 kid.
You’ll have a choice of filing statuses: Married Filing Jointly or Married Filing Separately. I don’t think Head of Household will be available since you’ll be living alone in the U.S., and Single definitely won’t be since you’re married. Ordinarily MFJ is the winner since your spouse has no income, but do bear in mind that all of her gross passive income — all CPF interest, for example — is reportable and U.S. taxable in a joint filing. Nonetheless, a joint filing is likely to result in a lower income tax bill, and it’ll also be a heck of a lot easier to qualify for a U.S. Roth IRA contribution.
2. I am going to Texas alone, wife & kid stay in Singapore. Wife not working & no side income.
3. Assume my annual pay in US is USD110,000
4. Assume monthly rental there is $2000 per month.
5. Not pursing any education there when working.
6. Will be returning to Singapore in a few years and not be retiring there.
Retiring in Singapore not in the U.S., I assume you mean. This’ll be via a H-1B1 visa, correct? U.S. Permanent Residence has certain potential tax implications if it’s long lasting enough, so just be aware of that.
Given above, when I file the income tax there,
(a) do I file under "SINGLE" or "MARRIED/JOINT" given that wife is not a US resident
Joint is allowed and likely much more favorable. However, your spouse makes this decision. If she wishes to do this then she’d make what’s called a Section 6013(g) election. That simply means she agrees to file a joint tax return with you, even though she’s a Non-Resident Alien (NRA) and has no legal requirement to do that. The advantage is that your tax bill is likely reduced. The disadvantage is that she needs to provide her details, including income, to the IRS and is joint and severally liable for income tax. In practice this liability probably wouldn’t mean much since she doesn’t even live in the U.S., but hypothetically if you committed tax fraud she could be held legally responsible, particularly if she knew about it. Which essentially would boil down to no U.S. visits, not even for a flight connection. All very hypothetical, though, since you’re not going to commit tax fraud, I assume.
(b) I check the list of tax deductible, seems like I am not really eligible for any tax rebates (other than "standard tax deduction"), right?
Right. The Standard Deduction is much bigger with a joint filing, though. I cannot remember if the Child Tax Credit is available when your child isn’t living with you, but let’s assume that won’t work. I don’t think the educational tax credits and deductions work either. In a way that’s all good news, though, since your U.S. tax filing will be pretty simple.
Note that you’ll almost certainly need to file FinCEN Form 114 and possibly IRS Form 8938. Your wife won’t need to file FinCEN Form 114 in these circumstances, but her financial accounts would count toward the Form 8938 threshold if she files a joint return with you, and her accounts would be Form 8938 reportable if the threshold is met. These are just reports, though.
(c) Which option will I fall under in the "standard tax deduction"? single filers/joint filers/head of household?
Definitely not Single. You’re legally married, and Single is never available to married people, including legally married same sex spouses. Head of Household is...not available (just checked). The IRS says Head of Household filing status is sometimes available to U.S. citizens with non-resident alien spouses, but you’re not a U.S. citizen. So your only two choices are MFJ and MFS, and really
your only choice is MFS since your wife exclusively decides whether MFJ is something she wants to do.
(d) 401k and other retirement contributions, given that I will not be residing in US in the retirement years, what options do I have to receive the payouts then? Or does it make sense to just take the income tax hit and just opt out of 401k etc?
No, you should definitely participate in your company’s 401(k) program and, on top of that, make an IRA contribution. If offered I would pick Roth for both — Roth 401(k) and Roth IRA. Start with collecting every dollar available in employer 401(k) matching funds, then do the maximum allowed for both 401(k) and IRA if you can afford it. Also your company’s Employee Stock Purchase Program (ESPP) if you get a decent or better discount on the share price.
Roth variants are likely to work better for you since you contribute from after tax income then make qualified withdrawals (in retirement) U.S. tax free. Since Singapore doesn’t tax passive income, that should all work quite fabulously.
Investment choices are another question. Get back to me if you want advice along those lines, but generally speaking you want 401(k) and IRA funds to be the most aggressively invested funds you have, in broadly diversified stocks, because you want your (hopefully) fastest growing wealth in these tax advantaged accounts, to maximize the tax benefits.
During your U.S. sojourn you’ll also want to give some thought about whether U.S. Social Security will be something you can qualify for, getting some low cost/internationally appropriate banking services, and covering your insurance needs. There was one person I remember who went to work in the U.S. and then naively refused to enroll in his company-provided medical insurance, thinking he’d save a few bucks. Oh my goodness is that reckless — don’t do that! But I’ll stop here and wait for follow up questions.
