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?
Benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program to a U.S. resident or resident alien 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. Any benefit under the social security legislation of Canada that would not be subject to Canadian tax if paid to a resident of Canada is not 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:
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 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 (PDF), Information on the United States-Canada Income Tax Treaty
- Publication 915 (PDF), 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 in 1980, 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 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.
References:
Are Social Security benefits received from Austria and 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. 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:
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