6.2 Social Security Income: Canadian & Foreign Treaties
In addition to U.S. Social Security benefits, I receive monthly
benefits from the Canada Pension Plan. I am a resident alien. Are my Canada
Pension Plan benefits taxable? How do I report them?
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
For an American citizen residing in Canada using Form 1040A, should
the taxable amount of U. S. social security benefits shown on line 14b be
$0.00 due to the Canada-U.S. tax treaty?
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
In addition to U.S. Social Security, I also receive British Social
Security. How should I report the British Social Security income?
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:
Are Social Security benefits received from Austria or Germany treated
like U.S. Social Security benefits? If not, how are they reported?
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
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