Taxpayer moved to oversea after retirement. He received welfare paid by the local government to old people over there. Does anyone know how to determine if it is taxable in the US?
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If it is equivalent to social security, then it may be taxable. That's a complicated area. It varies by country. There is an earlier thread talking about Dutch social security.
When I say "equivalent to social security," I mean that is a government-funded retirement plan that is based on his earnings record, and that he is entitled to receive it regardless of what other income he may have.
It may be equivalent to social security because you said it is something the government pays to "old people."
But you also characterized it as welfare, which suggests that it may be equivalent to SSI (Supplemental Security Income), or cash assistance from state-based welfare programs in the US.
So you need to ask a few more questions to tease this apart.
The US, and most other countries, don't give people money just because they are old.
They get money because they worked for a certain number of years, earning a certain amount of income, and then reached retirement age. That's three criteria that you have to meet.
Or they may get money because they are poor. This type of program may be based on old age, but it also based on income, or lack thereof. And it doesn't matter what their earnings record is. What matters is their current income level.
If the money your client is getting is based on the fact that he is old and poor, then it's nontaxable public assistance.
If it's based on the fact that he's old and he worked a certain number of years and earned a certain amount of income in that country, then it's a government based retirement program, similar to social security, and it may be taxable income.
BMKBurton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process.
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