You should understand that only Liability insurance is mandatory as far as law is concerned. Insurance companies try to sell you comprehensive insurance which includes many things that you may never need.

I will explain what part of the car insurance premium can be saved based on your personal usage while evaluating quotes from Geico, Progressive, Amica, Liberty Mutual, and more.

There are multiple car insurance apps that aggregate quotes from multiple companies. They are basically earning a commission as an agent.

How I Saved my Monthly Car insurance?

I just went back to buying only liability insurance for about $46 per month for a car worth $50,000.

The comprehensive cover was costing $100 per month for a car that had features safety features like:

• Automatic Braking to avoid Collision – both front and back
• Radar Controlled adaptive cruise control

My mind simply did not accept the cost of insurance when compared with the probability of an accident to cover the loss.

Hence, I just got rid of all the extra packages from the insurance and saved on insurance.

#1 Liability

Car liability insurance is mandatory in the USA and controlled by state laws. This is required to pay to cover the damage caused to other vehicles if you hit them.

This minimum basic insurance is also required at the time of car registration.

Liability has two sub-categories:

1. Bodily Injury
2. Property Damage

Each state in the USA has a different minimum required level for each part of Liability coverage.

Example:

Texas law requires you to have at least $30,000 of coverage for injuries per person, up to a total of $60,000 per accident, and $25,000 of coverage for property damage. This is called 30/60/25 coverage.

How Much Liability is Enough?

I recommend buying at least 3 times more than the state minimum values. In our example for the state of Texas, you should buy:

• $90,000 for Bodily Injury and (I chose 100,000/300,000 for myself)
• $75,000 for property Damage (I chose 50,000 for myself)

You can expect this 3 times the state minimum amount liability coverage for 1 car with 2 drivers at about $55 per month if you have good driving history.

Your driving history in the USA starts with your first license. That’s why I have suggested getting a driving license within a week of landing in the USA if you are an international student or a skilled visa worker like H1B or L1.

Is 3 Times the Minimum State Enough?

Liability cover of 3 times the state minimum may not be enough but is good enough to cover the cost of total loss for an expensive car like Mercedes, BMW X5 or Tesla.

People in the USA claim or sue you based on your capacity to pay back.

Your Insurance company also fights back or try to negotiate out-of-court in case of a claims.

They do not simply just pay whatever has been asked by the other party.

Find Probability of Accident – Your Driving Style

If you are extra cautious, buy a cover for 6 times the minimum or may be 10 times the minimum based on your own risk analysis of how bad you drive and the chances of you hitting someone on the road.

I usually just drive on weekends for short travel to malls or grocery stores and that too in a car with so many features to avoid a collision automatically.

So, my opinion of me hitting a car was the same as hitting a tree while walking. In other words, just a 10% chance of hitting another vehicle.

So, I chose to cover that 10% risk with 3 times the minimum state values.

#2 Collision – Damage to Your Auto

US car insurance companies sub-divide into two parts:

• Collision pays to repair or replace your car after an accident
• Comprehensive (other than Collision) covers flood, theft, vandalism, riots, tree fall, Tornado, Hail, and other such damages caused while the vehicle was not moving.

This is one of the most expensive portion of car insurance.

Collision insurance is required if you have bought your car with a bank auto loan or on lease. Lease is even higher than auto loan.

Your finance company will make it mandatory to buy the full collision coverage to cover themselves.

Should I buy Collission Coverage?

• I suggest not to buy collision if your car’s current worth is less than USD 15k.
• You can cover the damages to your own car if you hit someone. If the other person hits you, their liability insurance will pay for your car’s losses.
• If you have paid off your car loan, you can avoid paying high costs of collision.
• If you park your car in a garage, the ‘comprehensive – other than collision’ coverage is pretty much useless. You can avoid it.

I completely avoided buying car collision insurance as I started contributing $100 a month into a so-called car emergency high yield savings account instead of paying it to the insurance company.

This way, if there was any requirement like a windshield repair, I would use my savings from this car emergency repair fund.

If there was no damage (chances are good), I would have saved that money and earned interest too.

#3 Medical Payments

Medical payments from your car insurance pay for your own injuries in case you get into an accident on US roads while driving your car.

The medical coverage here is mostly too low to make any significant difference.

I suggest using your Health insurance coverage in case of need as that would have more comprehensive coverage.

Should You Buy ‘Medical payments Coverage’?

• Medical payments insurance is NOT mandatory. You can choose to not buy it.
• Buy it if your health insurance does not have accidental coverage. You need to read the fine print to check this.

#4 Uninsured Motorists

If you get hit by a car and the other person had no insurance, you will get covered by your own insurance with ‘Uninsured Motorists hit coverage.

The probability of getting hit is really low and that too by someone who has a car with no liability insurance is extremely low.

Almost all cars on US roads have at-least liability insurance which protects you in case they hit you. It has two sub-categories:

1. Bodily Injury
2. Property Damage

Both subcategories cover only your own personal injury and damage to your own car.

Should You Buy ‘Uninsured Motorists’ Coverage?

• You are not required to buy this insurance if you are fine with taking the loss by yourself as the probability of getting hit is too low.
• If you work from home, my suggestion is avoid ‘Uninsured Motorists’ cover as your chances of getting into this situation are less than 10%.

#5 Towing and Labor

Car towing and labor does not cost much. This covers the towing and labor cost if your car cannot be driven after an accident.

Should You Buy ‘Towing and Labor’ Coverage?

• I suggest to leave it out as most of the new vehicle purchases are covered for free roadside assistance by car manufacturers themselves. For Example, Honda, Toyota, Hyundai, Nissan and Ford have free roadside assistance programs.
• If you want to buy this coverage, buy it from third party roadside service like AAA than buying it from the car insurance provider. AAA has a much bigger network and offers discount programs too.

#6 Rental Car Insurance

You get a rental car for the period your car is in collision repair center.

Your insurance company will pay for your car rental expenses. Note that only a certain amount per day up to a maximum limit is covered based on your coverage.

Should You Buy ‘Rental Car Insurance’ Coverage?

• My suggestion is to use Uber / Lyft / Waze rides these days if required instead of buying rental car coverage.
• The chances of getting into an accident are lower and then using rental for the period of repair is even lower. If you do need a rental car, you can get it from the open market and pay for it as and when you need it. There is no need to keep paying a fixed monthly amount for a service that you may not use at all.

FAQ

Insurance Premium Increase

The car Insurance company does pay for the damages after an accident, but, eventually recovers them from your pocket by raising your monthly premium.

If you happen to be living in an area affected by any natural calamity like hail damage or a snow damage or a tornado, you would see that your car insurance premium is increased even when you never claimed anything.

Insurance companies increase the premium for the whole zip code if they have to pay out a large number of claims in that zone.

Low Cost Car Repair – No Insurance

This is an example case scenario to understand how you can handle the costs of repair if you decide to buy only ‘liability’ insurance.

You own a new Honda CRV (bought for $24k).

#1 Worst case – Total Loss

Maximum total loss i.e. 24K – You are ‘At Fault‘.

With liability insurance, the other party’s claim will be paid by the insurance company and you will need to pay for buying your OWN new car to replace your total loss car.

#2 Average case – Repairable Dents

Third-party car damage will be covered by Liability again. You will be required to pay for your own car’s fixes.

You can choose to shop around and even get it done by a local garage as their rates are much lower than car manufacturer’s own service centers.

You won’t believe but 90% of the car dealerships also just outsource the collision work to that local garage themselves including Honda, Toyota, and Nissan.

#3 Best case – Glass Damage

In most cases, you might have opted for a higher deductible for glass damage in the rage of $500 per instance.

If you shop around, the total cost of aftermarket glass replacements only costs around $500-600 anyway including labor!

The post Buying Car Insurance for Liability Only Cut My Premium By Half appeared first on AM22Tech.

As per the IRS and US taxation system, your worldwide income is taxable in the US as long as you are a tax resident.

• You can find your Tax residency by going through the IRS substantial presence test. In simple terms, if you have stayed in the USA for about 183 days, you should add your Indian income to your US 1040 tax return form.
• You can take the foreign tax credit for the taxes paid in India already as TDS (tax deducted at source).

NRE/NRO Tax by the Indian Government

NRE account interest income is non-taxable in India. Hence, no tax is withheld/deducted automatically by Indian banks.

On the other hand, NRO account interest is taxable at a straight 30% plus applicable surcharges and the cess.

You will be issued Indian TDS form 16A by your bank for this tax deduction which can be claimed in the US tax return as a ‘foreign tax credit’.

Calculate the Total Interest in the Indian Bank

Almost all the banks in India pay out interest quarterly (every 3 months). 

You just need to pull out each bank (e.g. ICICI, SBI, HDFC, Kotak, etc.) statement ending in March, June, September, and December. Find the interest pay-out and add up.

There is no clear guidance for the months or financial year that should be used that we could find. So, we suggest using the Indian interest from Jan to Dec to add to your US taxes.

This means:

• Count March’s (of the previous year) interest as well.
• Remember, the financial year in the USA is counted from 1 Jan to 31 Dec whereas, in India, it is 1 April to 31 March.

Indian Interest Conversion to USD

IRS publishes the exchange rate for all foreign countries as ‘year-end treasury rates’. Use this rate to convert India (or for that matter, any other country) to reach a USD amount.

It is possible that the current year’s rate is not published by the IRS. In that case, use the xe.com rate for Dec 31.

Example:

If you earned a total of 10,000 INR as NRE interest (add the sub-totals of all your foreign bank account’s interest), then your interest income in USD would be $143 if the exchange rate is 1 USD = 70 INR:

10,000 / 70 = $143

US Tax Form 1040 – Foreign Tax Credit

File the US income tax form 1040 with online services like Turbo Tax, TaxAct, HR Block, Liberty Tax, or FreeTaxUSA.

We have also used e-file.com and their online federal returns software is as good as any other with more free filing options.

Irrespective of the tax filing service you use, you should fill up Schedule B to disclose your Indian income as foreign income.

You should:

• Find the total amount of Tax (called TDS in India) deducted by the bank (by looking at bank statements).
• Indian bank should have sent you Form 16 (an Indian version of the tax form).

ICICI normally sends form 16 by postal mail or email if you have registered. The same may be available online for Citibank, SBI, or HDFC India customers.

On the other hand, If you paid any income tax in your foreign (the tax might have been applied if you are not from India) country, you should enter the information in the appropriate section.

FAQ

The post How to file US Tax on NRE, NRO Interest (without 1099-INT) appeared first on AM22Tech.

Filing the adjustment of status gives your non-immigrant kids an EAD and AP irrespective of whether the priority date (PD) date is current in the visa bulletin’s ‘Final Action’ or ‘Date of filing’ chart.

Here are the benefits.

#1 Child Tax Credit by IRS

H1B workers with non-US citizen kids used to receive child tax credit until the 2017 tax year.

With the new tax law (called Tax Cuts and Job Act 2017) passed by the Trump government, the child tax credit was restricted only to kids with SSNs.

Most non-US citizen kids on dependent H4 or L2 visas are not eligible to get SSNs. They all have ITIN which is not eligible for the child tax credit with the new tax law.

In this new tax law:

• The child tax credit was doubled from $1000 to $2000.
• The child’s SSN was made mandatory. Earlier, H4 and L2 kids with ITIN were also eligible for this credit.

#2 Job Change

Once your i485 has been pending for over 180 days with an approved i140, you gain additional wings to fly freely.

As per AC 21 law, you can change the job and the new employer can simply file form i485J to port your pending AOS application.

This also means that the new employer does not need to file their own PERM and i140 applications.

Isn’t it great?

You save the hassles of job scrutiny and easily save about 1-2 years of PERM + i140 processing time.

• I485 Pending (180+ days) and i140 approved: You are safe to change jobs but most attorneys recommend waiting for 180 days after the i140 approval date too.
• I485 pending (180+ days) and i140 approved for 180 days: You are safe. No issues as long as you change your job to the same or similar profession. As per general practical rule, the job duties in a new job should be at least 50% similar to the current job.
• I485 pending (180+ days) and i140 pending: It’s NOT safe to change the job before i140 approval. You will lose everything if the employer withdraws your pending i140. You can upgrade i140 to premium without an issue unless you have an H4 child that needs child age protection.

That’s a perk only offered to people who got the chance to file i485.

Will I need to file an H1B Transfer?

If you do not want to use i-485 EAD to work for the new employer, then yes, the new employer will have to file your H1B transfer and i485J supplement.

If you do use i485 EAD, then there is no need to file an H1B transfer.

Note that most people like to maintain H1B status just to avoid a situation where their i485 is denied in the future but this is not required by law.

Another situation where you may want to keep using H1B and not depend on i485 EAD is when you have filed EB2 to EB3 downgrade. Maintaining H1B will help you move from EB2 to EB3 and vice versa easily based on which queue is moving faster.

Most employers will be happy to hire you since your pending i485 gives them breathing space too.

Child EAD with i-485 Application

If you are eligible to file an i-485 even if the PD date is only current in the ‘date of filing’ chart in the most recent USCIS visa bulletin, we strongly recommend filing an EAD for your child irrespective of his/her age.

A child’s EAD helps you get the social security number for your child which in turn makes him/her eligible to claim a ‘child tax credit’ on your next year’s 1040 tax return.

This is a sample EAD card for category C09 (which is pending i485).

i-485 EAD card has category C09 and is allowed to get an automatic 6-month extension if the current one expires. This is unlike H4 and L2 EADs which do not get any automatic work authorization.

The child tax credit can be as high as $2000 per child based on your family’s taxable income.

The amount is reduced as your total household income increases.

This can easily set off the attorney’s i-485 EAD filing fee if you are thinking of saving money there as your child does not intend to work anyway.

You can also file the i-485 EAD yourself as the i-765 EAD form is simple to fill.

Required SSN

IRS rules make it mandatory for your kid to have a ‘required SSN‘ to claim their child tax credit on the tax return.

IRS Publication 972 lists the child tax credit requirements.

The term ‘required SSN‘ means that the SSN should be valid for employment in the USA.

Does my child’s SSN pass “Required SSN” requirement?

Look at these cases:

#1 Child is a US citizen

If your child was a U.S. citizen when the child received the SSN, the SSN is valid for employment and passes the “required SSN” requirement.

#2 Child SSN card marked “Not Valid for Employment”

If “Not Valid for Employment” is printed on your child’s social security card, then your child does not pass the ‘required SSN‘ test.

If your child’s immigration status has changed so that your child is now a U.S. citizen or permanent resident, you have to get a new social security card without the legend to be eligible to claim the tax credit.

The Social Security office can issue you a new card.

#3 Child EAD marked “Valid for Work Only With DHS Authorization”

If “Valid for Work Only With DHS Authorization” is printed on your child’s social security card, your child has the required SSN for as long as the DHS authorization is valid.

Most H1B, H4, L1, and L2 Social Security cards will have the annotation of “VALID FOR WORK ONLY WITH DHS AUTHORIZATION“.

This essentially means that a child can be claimed for the child tax credit as long as the EAD is valid.

You will need to get this “DHS Authorization” condition/label removed from your SSN card once you get your green card.

FAQ

The post Green Card i485 EAD Helps Get Child Tax Credit (and Job Porting without PERM) appeared first on AM22Tech.

Buying the iPhone from the USA and shipping it to India is not cheap after adding customs duties and GST tax.

Indian government charges customs duty on importing phones from China, the US, Canada, the UK, or Australia.

You have to pay for shipping, insurance, and customs duty in India along with GST tax for sending any phone including iPhone, Google Pixel, Samsung Note, and Samsung S series to India.

You may be paying much more for a smartphone if you decide to buy from the USA and ship it to yourself in India, the legal way.

Custom Duty, Taxes in India

Indian Customs duties and GST tax are due when you import mobile phones under the cell phone category.

Indian customs will find the CIF value for the iPhone or mobile that you are importing to India.

The CIF value is a total of:

1. the price paid for the goods (including sales tax) +
2. the cost of transportation +
3. loading, unloading, handling fee +
4. Insurance fee +
5. any other fee you pay for the delivery of goods from the place of export to a place of import

All other charges are calculated on this CIF value. 

Example:

In our example, this CIF value is the total money that you have spent on the item in the USA including all sales tax.

If you convert the dollar amount to Indian rupees with a conversion rate of 1 USD = INR 83, it probably makes no financial sense to ship it.

It would probably cost around 144k Indian rupees (equal to $1735) to send it to India.

Instead, we would suggest buying directly from India.

iPhone Global Warranty

Apple does offer a global worldwide warranty on its products bought in the USA.

This means that Apple’s official store in India should be able to help you fix or replace the iPhone in case it stops working within 1 year from the date of purchase (receipt date).

Apple’s warranty says they will:

1. Repair the hardware defect at no charge, using new or refurbished replacement parts, or
2. Exchange the product with a product that is new or which has been manufactured from new or serviceable used parts and is at least functionally equivalent to the original product, or
3. Refund the purchase price of the product. Apple may request that you replace defective parts with new or refurbished user-installable parts that Apple provides in fulfillment of its warranty obligation.

Send Locked iPhone

You will also need to make sure that you send the unlocked iPhone to India or you will need to find someone who can unlock the iPhone for you.

Unlocking can be done but it sometimes results in making the phone unusable. So, be very careful.

Many people buy the iPhone from service providers like ATT, Verizon, and T-Mobile with insurance and then send it to India.

They then, claim the insurance for the lost iPhone and try to get a new one.

1. First, this setup is illegal as per US law as it is considered fraud with insurance companies.
2. Second, the insurance companies have become smart and they have now added a co-pay and the deductible to make sure you do not get any such ideas.

Someone recently shared this picture of an Apple launch event with me which sums up the need to upgrade to a newer iPhone every year!

FAQ

The post Send iPhone USA to India, Custom Duty, GST Tax Calculator appeared first on AM22Tech.

The simple answer is YES, you are eligible to get your social security amount monthly after you turn 62 (retirement age) even if you are outside the US physically.

Eligibility

1 SSN credit is given for 1 quarter of social security tax contribution.

40 credits mean 10 years of contribution if you keep working and contributing without any break.

The 40 credits can be achieved in breaks also.

SSA.gov has a tool to test your eligibility for payments outside the US.

Example:

An H1B worker comes to work for Infosys in the USA. He pays social security tax for 6 years and then returns to India for offshore work. Infosys has an approved i140 for this employee.

He then changes his employer in India and joins TCS (Tata Consultancy Services).

TCS applies for his H1B transfer using Infosys’s approved i140 after 2 years in India and sends him again to the US for a long-term onshore assignment.

As soon as the person joins the TCS in the USA, the payroll starts again, and social security tax is automatically deducted before in-hand pay.

He has worked for another 5 years and continues to contribute to Social Security.

How to check my Credits?

You can register on the Social Security website for a free account and connect it with your SSN.

The website is pretty user-friendly and will show all your contributions irrespective of your work breaks.

You can even use your social account login like Facebook or Google to create an account on the SSA.gov website.

How to Apply for Social Security outside USA?

If you are living outside the USA and want to claim social security, you need to apply for it explicitly in the Social Security office located in your country.

If your country is not listed on the SSN website for an office location, then you should contact the US embassy in your country for the next steps.

Example:

If you are in India, you will need to visit the SSN office in Manila. You will need to visit the office 3 months before your retirement age i.e. 62 and apply for receiving benefits.

Once your application is approved and you are eligible (have 40 credits), you will start receiving your money in India.

How Much Money Will I Get As Social Security?

The amount of social security is calculated based on several factors. You can check an estimate of how much money you are eligible for by entering your average salary in the calculator provided by the SSA.GOV website.

You will need to register on the SSA.GOV website to access this calculator.

H1B workers Eligible to Get Social Security?

I discussed this topic with one of my guests on my YouTube channel and they also have the understanding that one is eligible to get Social Security outside the USA:

FAQ

The post Will Social Security Benefits be Paid in India / Canada If I Leave USA? appeared first on AM22Tech.

Generally, people below 50 should be able to maximize their tax benefits by using an HSA account to accumulate money.

IRS allows you to let the money grow tax-free in an HSA account in 3 ways:

• The money added to HSA is tax-free – No social, medicare, or income tax is deducted
• The growth in HSA money via mutual funds or interests is tax-free
• The money used for medical purposes is tax-free

This is the best account as far as saving taxes and growing money tax-free is concerned after the usual 401k account in the USA.

For people from India working on H1B visas in the USA, the 401k account is similar to the Provident fund account.

2023 HSA Limits

Since the account offers tax-free money, there are strict limits on how much you can contribute each year. There is no limit on the amount of growth it can make once contributed.

If you are age 55 or older, you can add an additional $1,000 to these amounts. IRS allows you to add more amount for medical savings than people younger than 55.

We suggest keeping depositing money in HSA with each payroll. The easiest way is to divide the total yearly amount by 26 payrolls and then allow your employer to deduct it automatically.

How Much Should I Contribute to HSA?

We recommend maxing out the contribution as it helps you save taxes and pay for medical expenses tax-free. This is completely tax-free money given the fact that sooner or later in your life, you might need some kind of medical treatment.

Pradeep Mittal, who came from India to the USA and has worked for the same employer for 24+ years recommends using the maximum limits on HSA. He believes that HSA money is tax-free and you should use the maximum amount allowed by the IRS.

If you and your spouse both have their own HSA account, the maximum contribution limits still apply.

Example:

If Ram and Sita have their own HSA account, then both should agree on the portion that each will contribute to making sure the maximum family limit is not crossed.

• Equal amount: Both Ram and Sita can divide the maximum amount by half and then contribute to their own HSA.
• Full amount by one person: Either Ram or Sita can contribute the full total maximum HSA and the other can add zero to avoid breaching the limits.
• Other non-equal Divisions: Decide any amount that Ram will pay and then the balance will be paid by Sita or vice versa.

Note that if you contribute more than the maximum limit in any year to HSA, the extra amount that you add is taxed at 6% per year, every year from that day onward. This is called the HSA excise tax.

Invest & Grow HSA Money Tax-Free

Most HSA banks will allow you to invest the extra funds over a minimum to be invested in the stock market via the mutual fund’s route.

Example:

Optum Bank HSA allows you to invest any money over and above $2000 in your HSA account.

We recommend setting it on auto transfer to S&P 500 Index funds like the ones from Fidelity or Vanguard to let the money grow until you need it.

HSA banks also charge a service fee for account maintenance if the balance is below $3000. Check your bank’s contract with your employer to see how you can waive this fee.

Normally, if you keep a minimum of 3k in your HSA account, they should waive all fees.

Is HSA money Lost if not Used?

The money is yours and can be used anytime for paying for medical-related purchases. There is a long list of items that are eligible and includes over-the-counter medications like pain killer Tylenol, allergy relief like Flonase or Allegra, menstrual supplies, and other first-aid medicines.

If you are not able to use it, your spouse can use it after you have left this world.

Death of HSA Holder

We strongly recommend making your spouse the beneficiary of your HSA account. The IRS rules rely on spouse status to tax money once you die.

• The spouse is the beneficiary – Your money stays tax-free and it will be treated as your spouse’s HSA after your death.
• The Spouse is not the beneficiary – If you have someone else as the beneficiary like your child, then
  • The account stops being an HSA, and
  • The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die.
• If your estate is the beneficiary, the value is included on your final income tax return.

Can I use HSA money for Non-Medical expenses?

You can withdraw money from HSA for non-medical expenses but you will need to pay the income tax, state tax, and then a 10% penalty before you can use it.

We strongly recommend not using it unless it is absolutely necessary. There are other better and less harmful ways of financing your emergency like:

• Emergency funds from your savings account
• Get a Home equity loan which may cost only 3-4% APR
• Personal loans may just cost 6.99 APR which is still less than a 10% penalty in HSA

High Deductible Medical Insurance Plan

The HSA account can be opened only if you have subscribed to the High Deductible medical insurance plan. This simply means that you will pay a low premium but will need to pay more whenever you need any medical help.

This is generally useful and in fact, a much better option if you do not have any regular medical needs.

You should opt for HSA (and a High deductible plan) if you:

• You do not have any disease and only visit a doctor for physical check-ups once a year
• Your child and spouse are healthy and only need medications here and there a couple of times a year for minor injuries or ailments like cough, cold, etc.
• You only need vaccinations like Flu every year, your child needs child vaccinations – these are always free in any insurance plan.

You should NOT opt for HSA if you:

On the other hand, people who have a regular need to see a doctor should not opt for HSA (and a high deductible plan). This is to make sure that the insurance company pays more than you do from your own pocket.

• You have Diabetes which needs regular medication and visits to the doctor’s office
• Your child has some ailment that needs monthly checkups

Can Visa Holders Open HSA Accounts?

Visa holders like F1, H1B, L1, and others can open Health savings accounts in the USA.

Since the HSA money can be used outside the US, you can use it in your home countries like China or India if you prefer treatment there for you and your family.

COBRA Insurance Premium by HSA

As per IRS rules, you can use HSA money to pay for COBRA coverage.

Most people including visa holders use COBRA whenever they join a new employer and want to keep their medical coverage from the old employer intact until the new employer’s coverage starts.

FAQ

The post HSA Account is Tax-Free Money, Invest in Stocks, Use for Medical Anytime appeared first on AM22Tech.

CTC Contents

A Sample Cost to Company package of 14 lakhs in Karnataka, India with take-home pay of 93 thousand per month:

CTC = Direct benefits + Indirect benefits + Saving Contributions

in-Hand Salary = Direct Benefits – Income tax – Employee PF – Other deductions, if any

Cost to Company Direct benefits

Paid to employee monthly and forms part of your take-home (in-hand salary) after deducting income tax plus any additional state taxes.

CTC Indirect Benefits

Benefits (also called Perquisites in legal Indian government terms) that an employee enjoys without paying for them. Your company takes care of them but adds their monetary value to your CTC.

Of course, it is an expense for the company and hence, could be added to CTC.

1. Interest-free loans, if any in CTC

Banking companies like ICICI allow their employees to get car/home loans at highly subsidized rates and then add the amount equal to the difference between the market and the subsidized interest rate to the employee’s CTC.

The interest that you did not pay (actually saved using a subsidized rate) is a benefit for you!

If you don’t take the loan, you won’t get this benefit, but it is anyway added to your CTC. Be careful while accepting the offer letter.

2. Food Coupons / Subsidized meals

Many MNC employers offer free lunch and evening snacks at the workplace. No lunch is free in this world.

On the other hand, meal vouchers (or food coupons) help you save income tax too.

3. Company Leased Accommodation (CLA)

Your employer might provide you with company-paid accommodation or pay rent to the landlord directly, saving you from the tension of finding a home and negotiating rent deals.

The monetary value of CLA, which is taxable, is added to your CTC, which is normally the rent and furniture cost.

4. Medical, Life Insurance premiums paid by the company

Group medical and life insurance policies by your employer give you much better and more comprehensive coverage than individual ones.

The cost is added in CTC and you can claim it for income tax rebate while filing ITR.

5. Free Cabs / Taxi for Office commute

You would be lured to a new job with the option of FREE transportation to the office. It is not free even if it is subsidized.

Most employers would add it to your salary package (CTC).

6. Income tax savings

Sometimes companies offer you some benefits that are tax-free for you but are taxable to them.

Example:
If you receive per diem allowances, they are subjected to FBT (Fringe benefits tax). It is supposed to be paid by your employer and not you.

Some companies do add the value of FBT in your CTC, which you, as an employee, would be liable to pay if your company does not pay it.

Related: Unspent Per Diem Allowance Received Abroad Are Taxable In India

7. Office Space Rent

You must have heard about FAT pay packages (several crores for a fresher) that IIM (Indian Institute Of Management) or IIT (Indian Institute of Technology) graduates receive.

A deep look at their break-up of CTC would reveal the work cubicle rent too.

Example:
If the company is spending INR 7000 per month on the cubicle that you would sit in at your work location, they would add the yearly rent to your CTC.

Employee Retirement Saving Contributions

Payments made to your long-term savings account by your employer.

1. Superannuation

A pre-defined amount is contributed every month to your superannuation account, mostly offered by multinational companies as a way of saving for retirement.

You can withdraw it after you retire or at the time of leaving the organization.

Most employers do not directly give you cash on separation though. You get the option of converting the amount into some kind of insurance policy.

2. Employer Provident fund Contribution

Most employers contribute 12% (called PF) of the basic salary every month to the employee’s Provident fund account, shown in CTC. An employee also contributes 12% (called VPF).

Difference between Employer PF, Employee PF (Called VPF) and PPF.

3. Gratuity is part of CTC

Paid @4.81% of total yearly basic salary, per Indian tax law, with no withdrawal allowed before 5 years.

If you leave the organization anytime before 5 years, you lose your Gratuity accumulation.

The post What is CTC? Difference between CTC Package and Net Salary? appeared first on AM22Tech.

I have been using it for the past 4 months and have the data to share with you.

Interest Payment

First things first, the amount you earn from stock lending is peanuts. It’s a very small amount that Robinhood pays you out of what they might be charging their client.

In the image below, the total value of stocks on loan at this time is $1,14,000. The interest amount paid is $17.50. This is around 0.00015%, which is really a low amount.

The total interest earned in 7 months from Jan 2023 to July 2023 is just $132.93. Of course, not all stocks were on loan and they vary each day and month.

They do not disclose how much they have received by lending your stock to the investors. The only documented amount that Robinhood shares is this:

To be eligible for Stock Lending, you’ll need to have at least $5,000 in total account value Or at least $25,000 in reported income. Also, you should not be a day trader.

How much stock lending pays for Amazon stock?

I am really disappointed to say that stock lending does not really pay anything for Amazon. I received 0.01 cents for Amazon stocks!

In fact, most stocks earn only $0.01 cent as the stock lending interest payment.

Major Financial institutions and other market players borrow stocks to clear trade settlements and short selling.

Normally, the stocks with low market availability and high demand are more likely to be borrowed.

Dividends on Stock Lending

The dividend is paid on the Stocks on loan but it is treated differently for income tax purposes by IRS.

The person or entity who has taken your stocks on loan gets the dividend from the issuer. This person will then pass on the full dividend to you as cash through Robinhood.

These payments are known as “cash in lieu of dividends” or “manufactured dividends.”

Robinhood’s brokerage statements will mark Manufactured dividends as “Manufactured Div.” instead of “Cash Div.”

Income Tax on cash from Stock Lending?

Note that since this is paid out as cash instead of dividends, cash is taxed as ordinary income.

You will simply add this amount to your total income and pay the normal tax rate.

The dividends on the other hand are taxed as per capital gain tax rules, which may be charged a lower tax rate.

Risks of loaned stocks

Loaned stocks are not covered by Robinhood’s SIPC insurance.

They simply protect the loaned stocks by keeping cash equal to the value of loaned stocks at a third-party bank. This bank would pay you the value of your loaned securities in cash if Robinhood filed for bankruptcy and couldn’t return your stocks to you.

Is it worth using Stock Lending?

In my opinion, I did not find the stock lending attractive given the amount it pays back as interest.

I would be paying a higher rate of tax on the dividends paid out on loaned stocks too.

Have you used the stock lending and have a different opinion? Do share it with us.

The post How much Does Robinhood Stock Lending Pay? appeared first on AM22Tech.

The good news is that the agent cash back after closing in the US is not taxable in your hands. You can safely keep the full amount and use it to buy furniture for your new home.

New Construction Home 5% Cash Back

New construction property 5% cashback is popular with H1B workers and is normally offered by agents in high-competition markets such as Dallas.

The incentive is given specifically in new homes as the agent does not have much to do in the deal between the buyer and the developer.

• A buyer would normally just look at a newly constructed home, make a buying decision, and involve the real estate agent at the time of signing the sale contract.
• The agent would receive a 3-5% sales commission from the builder and then would pass on the whole amount to the buyer by just keeping about USD 1000 as his own cost.

Real estate agents in Atlanta also do the same because they can get good revenue even if they just keep 1k for every sale and that too without doing anything in the wholesale transaction. It is not common in some states like Massachusetts.

Real Estate Agent Issued Form 1099-MISC

As per Turbo Tax, you do not need to worry even if the agent has issued you form 1099-MISC as real estate commission rebates are not taxable income.

Turbo tax suggests that you should ask for a corrected 1099-MISC from your real estate agent to avoid paying tax on your 1040 return. In-home purchase money-back program, there is no 1099-MISC required.

The other tax filing software or companies like e-file, freeTaxUSA, and Liberty Tax, HR block should also help you save tax on real estate commissions too.

Note that Indian bank NRO, NRE interest is taxable in the US even though Indian bank does not issue form 1099-INT.

IRS Rule for Property Purchase Cash Back

IRS had clarified that any cashback received from a developer or real estate agent is not taxable as it is a rebate that you received on a purchasing price.

Example:

• You purchased a home directly from a builder like Landon Homes in Dallas for $500k.
• There is a broker who sent you a cash-back check of $24k, which is roughly 5% commission after keeping 1k as his own commission.

This cashback is considered a rebate (or credit) by the IRS and hence is not taxable on your 1040 return.

As per IRS, down payment assistance received by a home purchaser represents a rebate or an adjustment to the purchase price, and, as such, is not included in a purchaser’s gross income.

Here is the IRS ruling.

Similarly, if you buy or lease a car with a manufacturer cashback rebate, you do not include it in your gross income on a 1040 tax return. The rebate is considered an adjustment to the purchase price of the automobile.

Should Agent Issue 1099-MISC?

As given in the IRS ruling, your real estate agent is not required to make a return under section 6041 of the Code for payments as these payments are not considered your (home buyer’s) income.

Your real estate agent should not be filing any IRS reporting forms for cashback.

The broker should reduce the cashback amount from his gross income while filing his own income tax return.

FAQ

The post Is Real Estate Agent Cash Back Taxable in US (1099 MISC?) appeared first on AM22Tech.

If you can manage without a car, which usually is not the case in the USA, it is advisable to wait for about 4-5 months and build a good credit history. A good credit history helps you get a car loan at a lower interest rate which is commonly known as APR in the USA.

Most newcomers opt for buying a used car which I do not recommend due to:

• High maintenance cost and
• Non-reliability
• Loan APR is higher on used cars
• The insurance premium is high

Remember that Car insurance in the US is charged on per month basis and can cost from $40 for just liability to up-to $200 for comprehensive coverage for newcomers to the USA.

Buy New or Used Car?

Buying a new or old car decision varies by person to person but in my opinion, it is always beneficial to buy a new one if your stay is going to be longer than 13 months.

My opinion may sound contradictory to what you would normally hear from your peers.

Most would almost always advise you to go for a used car within the budget of about USD 4-5K and save money. The primary reason behind this is ‘No credit’ history.

Popular used cars for international students, new H1B, L workers in the USA in the price range of 4k to 6k with around 80k miles and 8-year-old model:

• Nissan Sentra
• Toyota Corolla
• Honda Civic

I would advise you to buy a new car. You can certainly get an Auto loan and that too within an hour with no credit history.

If you do want to buy a used car, go for only top 3 reliable brands Toyota, Honda and Nissan as they hold their resale value.

Credit Union vs National Banks

You may face credit denials from conventional national banks like ‘Bank Of America’ or ‘Chase’. They usually do not give out car loans for tenure more than your H1B Visa’s validity either.

My suggestion is to contact local ‘Credit Unions’ as they are flexible in their lending policies. They are nothing but small financial institutions that are more state-centered than the national market.

Benefits of Auto Loan from Credit Union:

• Low APR (interest rate) than Bank
• Faster Processing
• No guarantor required even if you have no credit or low credit history

I know many people who got a 5-year car loan financed from ‘Digital Credit Union‘ in MA within an hour and that too with an H1B visa validity of only 3 years.

DCU even lowers your APR rate after 3 months of loan if you have been repaying on time without fault. I have seen an automatic reduction of 0.25% in APR.

Similar credit Union banks operate in each state like California has CCU and Texans Credit Union for Texas residents. Do search for one in your state.

Car Manufacturer Finance Deals

Honda, Toyota, and Nissan are the favorite brands due to their good resale value, engine reliability and better mileage. Keeping in mind the high demand for their family vehicles, these companies have also started 0% APR (zero percent interest) car loan offers if you get finance from their own sister companies.

Example:

• Honda finance will lease or sell any of their cars from Civic to CRV for 0% if you opt for Honda Financing.
• Similarly, Toyota will be happy to sell you their best selling Camry at no interest cost to you.
• I have seen more aggressive auto finance offers from Nissan though as they are trying to compete for your business with market leaders Honda and Toyota.

Lease vs Buy

I strongly suggest buying the car even if you have to use bank finance than leasing. If you are not an expert in negotiations or do not understand the leasing tricks, you will almost always pay more for the car in a lease than buying.

If you try to talk to the car finance guy at the dealership, they will confuse you with lease jargons like:

• Residual value
• Lease break fee
• Vehicle return fee
• Documentation fee
• etc..etc.

The salesperson will always try to sell you a lease deal by showing lower monthly payments as compared to finance, but, mark my words that you will pay more for the same car at the end of the lease than finance.

Cost Benefit Analysis of New Vs Old Car

We assume the car to be a Honda Accord or its equivalent like Toyota Camry in this example.

You can get an Auto loan from the car dealer or a credit union easily even if you do not have a credit history. Remember that any kind of credit helps you build your history.

The only difference is that if you have at least 4-5 months of history, you can get a lower APR (interest rate) deal on the annual percentage rates. Else, you might have to pay a little higher.

H1B Car buying case – Example

H1B lands in the USA with 9 months left on the approved 1 year. Used city’s average public bus transport (and no train) to commute to the office or used to take help from fellow workers.

The grocery stores were within walking distance. The idea was to buy some time and build a fair credit history. Meanwhile, apply for H1B extension to get longer validity.

After 9 months, with a visa extension of 3 years, he applied for a car loan with credit union DCU.org and a credit history rating of 678.
The loan was quickly approved by credit union even when it was denied by Chase bank and Honda Finance (from the dealer) before contacting DCU.

FAQ

The post H1B Visa Buy vs Lease New, Used Car In USA appeared first on AM22Tech.