I'm considering working in the USA. A lot of the job offers list their salaries as $X annually. In my country, salary is often mentioned by base monthly salary and doesn't include bonuses and benefits.

In the US, does the annual salary include bonus? Does it include tax? Benefits, pension scheme? If a salary is listed as $120k, would that be $10k per month?

  • 1
    While interesting, it's not a question restricted to expats, as per the help center. Sorry, but in beta we need to be extra strict on this.
    – Mark Mayo
    Dec 22 '15 at 4:08
  • There is a lot of depends in your question but this is not on-topic here.
    – Karlson
    Dec 30 '15 at 3:18

US salary figures are typically gross, and do not include bonuses, though a bonus may be mentioned in addition. Bonuses vary widely by industry and by the type of employer. Many jobs will have no bonus; others will have a small end-of-year bonus of similar value to a small gift ($50, say). Still others will have bonuses that will run into the thousands or hundreds of thousands of dollars.

Bonuses are typically variable, usually based on some measure or measures of performance, which is why they can't figure too prominently in a salary negotiation.

Income tax and payroll taxes are deducted from the gross figure. The employer pays additional payroll tax on top of the salary figure; this is not included in the figure you are quoted. For example, if your salary is $100,000, you and your employer will each have to pay $7,650 in social security and medicare taxes. After this deduction, your pay pay will be $92,350, but there are additional deductions to consider, including income tax withholding.

Income tax withholding will depend on the level of your salary, as well as your filing status and the number of dependents you have. These factors have a significant impact on your income tax liability, so they have a significant impact on tax withholding.

Some benefits may be deducted from your pay, as well. The amount of money employees need to contribute to their health care coverage varies from employer to employer. Some still have 100% employer-paid plans, but this is no longer common. Employee contributions are generally deducted before income tax is calculated. Employer contributions are not included in the gross salary figure, and the level of these contributions does not affect the employee's tax liability.

Defined-benefit pension schemes are rare these days. Instead, most employers have 401(k) plans, where the employee contributes from the paycheck. Most employers match up to a certain percentage (4% or 5%, for example) of the contribution. The tax arrangements vary; the classic 401(k) allows you to invest pre-tax income, and any earnings on those investments are taxed when they are withdrawn in retirement.

So, yes, if your gross annual salary is $120K, your gross monthly pay will be $10,000 a month, or $4,615 every two weeks (two-week pay periods are common). But your take-home pay will be considerably less than that.

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    A general rule once your income is at 75k or more, is that your "take-home" will be around 60-66% of the gross.
    – mkennedy
    Dec 22 '15 at 14:15
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    @mkennedy For what jurisdiction? Some states have no income tax, whereas some municipalities have both state and municipal income tax.
    – phoog
    Dec 22 '15 at 14:36
  • very good point! I'm in California.
    – mkennedy
    Dec 22 '15 at 17:47
  • Would it still be roughly the same for expats? As in tax, etc? I'm not even sure what a 401(k) is.
    – Muz
    Dec 30 '15 at 9:33
  • @Muz a 401 (k) is a retirement plan with favorable income tax implications, funded through salary deductions. It shouldn't be too hard to find information about them on the internet. Expats will have the same deductions; as long as you are employable in the US you will receive the same benefits.
    – phoog
    Dec 30 '15 at 13:28

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