Canadian & Foreign Treaties (2004 IRS FAQ)

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IRS FAQ 6.2 Social Security Income: Canadian & Foreign Treaties

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 U.S. 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.


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.



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