USA Retirement Income Canada Tax foreign tax credit

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
Danielle105
Posts: 11
Joined: Fri Jan 13, 2017 9:13 am

USA Retirement Income Canada Tax foreign tax credit

Post by Danielle105 »

I am a retired Canadian citizen living in Connecticut. After 30 years for family reasons I am considering a return to Canada. Hence I have been looking at some tax scenarios, based on me returning to Canada, (and returning my green card). I am single with no other family members in the USA.

The questions I now have relate to foreign tax credits. I have a defined benefit pension from a large USA conglomerate. My plan is to leave my 401K where it is. I also have a Roth IRA.

I see that for Social Security, the 15% withholding, deduction is taken on T1 line 256. (Not on the T2209 foreign tax credit forum)

However, I am uncertain as to where the deduction / credit related to withholding should be taken for:

1. The defined benefit company pension.

2. The 401K withdrawals

I understand there is no ongoing reporting requirement for Roth IRA withdrawals.

Can anyone clarify? Thanks

(This is my first time posting here.)
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Once you move to Canada, your SS benefit is no longer taxed in US, it is only taxed in Canada (at the 85% inclusion rate) The 15% that you read about is not tax, it is the 15% that is not taxed (like US treats it). This is regardless of whether you keep your GC or not.

Your pensions (pension and 401(K)) will be taxed as normal in US until you give up your GC.
After that they will be withheld 15% IRS tax by the pension fund -- so you need to inform them that you are no longer GC holder and are living in Canada.

Then you will report the gross pension on your Cdn return, aand use the 15% withholding (or the tax you calculate on your 1040) as foreign tax credit using the form you mentioned.

While Roth is not taxable in either US or Canada, you do MUST report its existence to CRA in the first year you file a tax return in Canada.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Danielle105
Posts: 11
Joined: Fri Jan 13, 2017 9:13 am

Post by Danielle105 »

Thank you for the prompt reply.

If you double click on the entry for line 256, using Studio Tax, a box opens up where there's a field identified as "Other deductions from a foreign pension income declared at line 115". Not sure when that's applicable. That field in the box seems to be the source of my confusion.

After reading your reply I understand that field is for a special situation and not the 15% withholding.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Yes, and in the case of Social securirt, it is the reduction in the taxable portion by 15% allowed by treaty.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Post Reply