IS THE ENGLISH OLD AGE PENSION (ENGLISH SOCIAL SECURITY) TAXABLE FOR A U.S. CITIZEN? MY HUSBAND IS COLLECTING BOTH AMERICAN SOCIAL SECURITY AND ENGLISH OLD AGE PENSION. THIS HAS RESULTED IN A WINDFALL TAX THAT LOWERS THE AMOUNT OF HIS AMERICAN SOCIAL SECUITY. SO MY QUESTION IS: IS HIS ENGLISH OLD AGE PENSION TAXABLE IN THE UNITED STATES? HE IS A CITIZEN OF THE U.S. AND LIVES IN OREGON. PLEASE ADVISE TO GOWITHTHEFLO1@VERIZON.NET. YOUR HELP WILL BE APPRECIATED. THANKS, FLO
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The IRS website provides the following answer: http://www.irs.gov/faqs/faq6.html
Question: In addition to U.S. Social Security, I also receive British Social Security. How should I report the British Social Security income?
Answer: Under the current U.S.-United Kingdom income tax treaty which became effective 2003, social security income is taxable only by the country making the payment. 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 $0. Under the prior treaty with the UK, social security benefits were treated the same way. -
It's interesting that Rev Ruling 76-121 comes to the same conclusion but says you CAN recover your cost (if any). If I read the faqs correctly, it says there will be no recovery.
The headliner says : "Social security benefits paid by United Kingdom. Social security benefits paid by the United Kingdom to a resident of the U.S. are includible in gross income; however, recipients may be entitled to recover their costs, if any, under section 72 of the Code and may be eligible for retirement income credit."
I would assume that one of updated treaty protocols changed this but I see no note suggesting the Rev Ruling has been modified. Just seems strange - perhaps I'm missing something.Comment
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As my wife also gets this in addition to US SSA, I report the UK amount on Line 21 after the proper Pound to US$ conversions when paid.Comment
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Treatment of other countries old age benefits
It was my understanding that the foreign SS was added to the US (after conversion to US dollars) and then the calculation would take place as if it was all US. I have used this method for a taxpayer who receives Canadian retirement and US. THe NR4-OAS and NR4 forms received from Canada are the ones I considered as SS. THe NR4 labeled Canadian Govt Annuities was converted to US dollars and entered on the pension line.
I have only had experience with German SS and treated it just as US. The check vouchers we have been given were already converted to US. Certanly hope this is correct. We have never been questioned on this.Comment
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The treatment is different for payments from Canadian & UK Social Security. IRS Notice 98-23 states (as a result of an updated tax treaty) that Canadian S.S. would be treated in the same manner as US S.S.. I don't think this has changed since then.Comment
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NY EA is correct - Canadian is added to US SSA, but you need to check the treaty for each country to see how to handle.Comment
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>>English Old Age Pension<<
What is that--some kind of cheap cologne?Comment
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