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Canada pension received by US Citizen living in U.S.A.

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ARTICLE XVIII

Pensions and Annuities

1. Pensions and annuities arising in a Contracting State and paid to a resident of the other

Contracting State may be taxed in that other State, but the amount of any pension included in income for the purposes of taxation in that other State shall not exceed the amount that would be included in the first-mentioned State if the recipient were a resident thereof.

2. However:

(a) Pensions may also be taxed in the Contracting State in which they arise and

according to the laws of that State; but if a resident of the other Contracting State is the

beneficial owner of a periodic pension payment, the tax so charged shall not exceed 15 per cent of the gross amount of such payment; and

(b ) Annuities may also be taxed in the Contracting State in which they arise and

according to the laws of that State; but if a resident of the other Contracting State is the

beneficial owner of an annuity payment, the tax so charged shall not exceed 15 per cent of the portion of such payment that is liable to tax in the first-mentioned State.

3. For the purposes of this Convention, the term "pensions" includes any payment under a

superannuation, pension or retirement plan, Armed Forces retirement pay, war veterans pensions and allowances and amounts paid under a sickness, accident or disability plan, but does not include payments under an income-averaging annuity contract or any benefit referred to in paragraph 5.

4. For the purposes of the Convention, the term "annuities" means a stated sum paid periodically at stated times during life or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered), but does not include a payment that is not a periodic payment or any annuity the cost of which was deductible for the purposes of taxation in the Contracting State in which it was acquired.

5. Benefits under the social security legislation in a Contracting State paid to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.

6. Alimony and other similar amounts (including child support payments) arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, but the amount included in income for the purposes of taxation in that other State shall not exceed the amount that would be included in income in the first-mentioned State if the recipient were a resident thereof.

Based on the tax treaty info above, it seems that the US and Canada can tax this pension. Any comment will be appreciated

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Posted · Report post

From the IRS:

Question: Are the Canada Pension Plan and Canadian Old Age Security Benefits taxable? If they are, please tell me where they should be entered on Form 1040.

Answer: Benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program:

  • If the recipient is a resident of the United States—

    • are taxable only in the United States if the recipient is a resident of the United States,
    • are treated as U.S. social security benefits for U.S. tax purposes, and
    • are reported on Form 1040 (PDF), U.S. Individual Income Tax Return orForm 1040A (PDF) on the line on which U.S. social security benefits would be reported.

    [*]If the recipient is a U.S. citizen or green card holder who is a resident of Canada are taxable only in Canada.

NOTE: Refer to Tax Topic 423 for information about determining the taxable amount of your benefits.

Additional Information:

Category: Aliens and U.S. Citizens Living Abroad Subcategory: Canadian & U.S. Tax Issues

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Posted · Report post

Thank you for the info Marco. I also have the issue that Canada witheld $1,250 from one pension which is 15% of the total. I wonder if canada will require a return and they just simply keep the money.

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Posted · Report post

That's another can of worms, I would not even intend to fill out a foreign tax return. The best you can do is just prepare the foreign tax credit form.

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