There are 5 tests that must be met if an individual is to qualify as a dependent. With respect to the gross income test, your child's social security benefits would not count as income. With respect to the total support test, your child's social security benefits, if spent for support, will count as being provided by the child. Refer to Publication 501, Exemptions, Standard Deduction, and Filing Information, for more information.

References:

• Publication 501, Exemptions, Standard Deduction, and Filing Information
• Tax Topic 354, Dependents

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in the current year in your current year's income, even if the payment includes benefits for an earlier year.

Generally, you use your current year's income to figure the taxable part of the total benefits received in the current year. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers the taxable portion of your benefits. Refer to Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for a detailed explanation of the election and worksheets.

References:

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social security and equivalent railroad retirement benefits

By provision of the income tax treaty between the U.S. and Canada, benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program to a U.S. resident are taxable, if at all, only in the United States. These Canadian benefits are treated as U.S. social security benefits for U.S. tax purposes. Thus, under section 86 of the Internal Revenue Code, the portion of the benefits that is taxable will depend on your total income. If your total income is above certain limits, a maximum of 85% of your benefits will be subject to U.S. tax.

Canadian benefits that are treated as U.S. social security benefits are reported on line 20a and 20b of Form 1040 or line 14a and 14b of Form 1040A.

References:

• Publication 597, Information on the United States-Canada Income Tax Treaty
• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social Security and Equivalent Railroad Retirement Benefits

Under the 1997 protocol to the Canada - U.S. tax treaty, the Canadian and US governments agreed to return to a residence-based system under which social security benefits are taxable exclusively in the country where the recipient resides. As a result, the entry for line 14b would be $0.00.

References:

• Publication 597, Information on the United States-Canada Income Tax Treaty
• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social security and equivalent railroad retirement benefits

Under the U.S.-United Kingdom income tax treaty that entered into force during 2003, social security income is taxable only by the country of residence. If you are a resident of the U.S. for tax purposes, the income would be reported and taxed in the U.S. You would not treat the income as U.S. social security benefits. The entire amount would be taxable as pension and annuity income on your U.S. tax return. Your "investment in the contract" for purposes of determining the portion of each payment that is taxable would be $0. Under the prior treaty with the UK, social security benefits were treated the same way.

References:

• Publication 519, U.S. Tax Guide for Aliens
• Publication 575, Pension and Annuity Income

Austrian social security benefits paid to a U.S. resident or a citizen of the US are taxable only by Austria and not by the United States. These benefits should not be reported . German social security benefits paid to a U.S. resident are taxable, if at all, only by the United States. These German benefits are treated like U.S. social security benefits. Thus, under section 86 of the Internal Revenue Code, the portion of the benefits that is taxable will depend on your income level. If your total income is above certain limits, a maximum of 85% of your benefits will be subject to U.S. tax.

References:

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits

To determine whether any of your benefits are taxable, compare the base amount for your filing status with the total of one half of your social security payments plus all your income from other sources, including tax exempt interest.

If you are married and file a joint return, you must combine your incomes and your social security and equivalent tier 1 railroad retirement benefits when figuring the taxable portion of the benefits. The taxable amount of the benefits is figured on a worksheet in the Form 1040 or 1040A instruction book, or in Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Refer to Tax Topic 423, Social Security and Equivalent Railroad Retirement Benefits, for base amounts, and additional information regarding taxability and reporting requirements.

References:

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social security and equivalent railroad retirement benefits

There is no difference in the formula for determining the taxation of social security benefits - whether the benefits are age-related or disability-related, except social security benefits do not include supplemental security income (SSI) payments, which are not taxable.

References:

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social security and equivalent railroad retirement benefits

The income is reportable on the return of the person who has the legal right to receive the benefits. The social security benefits belonging to your dependent child must be added to your child's other income to see whether any of those benefits are taxable to the child. Whether the benefits are taxable will depend on the amount of benefits and amount of other income including interest or dividends.

References:

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social security and equivalent railroad retirement benefits

Social security is not considered earned income for EIC purposes. However, depending on your other earnings during the year, part of it may be taxable income.

References:

• Publication 596, Earned Income Credit
• Tax Topic 423, Social security and equivalent railroad retirement benefits

The person who has the legal right to receive the benefits must determine whether the benefits are taxable. For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. One half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to the child.

References:

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Tax Topic 423, Social security and equivalent railroad retirement benefits