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I'm going to move to the US next year (legally) as a permanent resident and I would like to continue my current job (for an Italian company) as a software engineer.

The company told me they can afford an expense of about 4.2k$/month, giving that I wanted to move in California, what would be the best option to pay taxes for such income? As a self employee?

Given that gross amount, how much can I expect to put in my pocket monthly?

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Generally, in the US, the amounts are calculated annually. So, 4.2K a month would be $50K/year. For a software engineer in California this is extremely low. You can check the salaries on various comparison sites, for example - glassdoor.com. Choose the area, similar companies and job descriptions and see how much people earn. With several years of experience, a Software Engineer in California would earn at least double that amount.

The reason is that California is a very expensive State to live in. It is the State with the highest income tax in the US (except maybe for New York, and I'm not even sure about that), and the highest cost of living. Even in the areas like Los Angeles, or even Central California, it is much more expensive than most of the US.

Back to taxes - you will probably be considered as self-employed. So you will pay, for starters, 15% self-employment tax (equivalent of what you and your employer would pay in FICA taxes had you been employed, a US equivalent of National/Social Insurance systems you're familiar with in the EU). After that, depending on how large your family is and how much of other income you may have, you'll probably not pay much in taxes - maybe another 10-15% in total. So assuming you paid 30% in taxes, you'll end up with $35K a year net income, which is $3K a month. You can live with that, but depending on your life style - it may be very tough. In the Silicon Valley - a decent 1bd apartment will cost you between $1.5K and $3K a month just for rent.

Keep in mind that you'll have to buy your own health insurance policy, which will cost you between $500 and $1500 a month, depending on the coverage options (under the ObamaCare exchanges). It may be tax deductible if you're self-employed, but it is a significant expense.

The solution of continuing working for your Italian company is excellent in the short term for you to move and acclimatize in California. But you will be looking for a job very quickly.

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  • Thanks for the details, I'll wait a bit for other answers before accepting this. – alex88 Jul 29 '14 at 8:41
  • Do you mind to give me some references/any working calculator for what you just posted? – alex88 Jul 29 '14 at 9:03
  • For salary calculations I usually use paycheckcity.com, but for self employed it is a bit harder to find calculators. I live in California and know the tax laws relatively well, so I can estimate in my head. – littleadv Jul 29 '14 at 9:05
  • @alex88 one option can be to buy on Amazon.com a prior year tax return preparation program and type in the numbers. The laws don't change significantly (although they do change). Keep in mind that as a foreigner you'll also be subject to FBAR requirements, FATCA forms, etc. Not taxes to pay, but yes forms to fill that "regular" tax preparation software won't be able to handle well. – littleadv Jul 29 '14 at 9:07

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