US Tax on OAS & CPP for Dual Taxpayers

[Peter G Hamilton]

My wife and I file jointly in US and individually in Canada. Under the tax treaty are Canadian CPP and Canadian OAS exempt from US taxation (as is US social Security)? i.e. by excluding these items from line 16b of our 1040.
If exempt, then is it correct that there no Foreign Tax Credit for these items on our US return?

Peter

[nelsona]

CPP and OAS are considered social security benefits, thus they fall under line 20, not 16 of 1040.

As you said, if you live in Canada, CPP and SS, and OAS are only taxed in canada (remember to exclude 15% of your SS on line 256).

If you live in US, CPP and OAS should have no tax withheld, and they would be taxed at the 85% inclusion rate like SS.

There are 2 correct ways to exempt CPP/OAS/SS on your 1040. The simplest is to exclude the entire amount from 20b, and write a 8833 form stating so by treaty.

The absolute correct method (very complicated for nothing, IMO) is to include 85% all of it on 20b, and then use the method for a form 1116 "income re-sourced by treaty" until your US tax amounts to zero on this income.

I would simply use the first method.

[Peter G Hamilton]

Thank-you Nelson

Peter