Tax on Early SS Retirement Benefits

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kev_indigo
Posts: 10
Joined: Fri Apr 17, 2015 4:18 pm
Location: Canada

Tax on Early SS Retirement Benefits

Post by kev_indigo »

Situation: U.S. citizen living full time in Canada with PR status. Worked 21 years in U.S. before moving to Canada, have worked for 19 years now in Canada. I have sufficient credits to earn both SS Retirement benefits in the U.S. and CPP benefits in Canada. At the moment, I am still working and expect to work at least through the end of this year.

I am turning 62 later this year and trying to decide if I should take early SS retirement benefits starting this year or postpone starting SS benefits.

I am inclined to take the early SS benefits, except I want to understand the tax implications in Canada. From my 2020 T1, my marginal Federal + Provincial tax rate was 42%. What I don't want to do is start early SS this year and then fork over 42% of the payments to the CRA. If this were to be the case, then I would postpone my SS benefits until after I have stopped working so my tax rate in Canada will be lower.

An ex-coworker of mine now retired and living in Canada with dual US/Canada citizenship told me that SS benefits are not taxable on your U.S. return when you reside outside of the U.S. Assuming this is true, I assume the CRA will take their cut as no matter what.

I searched on the Serbinski website for info on taxation of retirement benefits for both US/Canada returns but couldn't find a simple summary. Is there a good resource available on the web to find this information? I tried searching for info here on the forums but it is like looking for a needle in the proverbial haystack to find the exact or similar situation.

An advance thank you to nelsona if you can share any info on this. I read some earlier posts where you were discussing taking early SS so I assume you are well aware of the tax situation and strategies to deal with it.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax on Early SS Retirement Benefits

Post by nelsona »

85% of your SS will be taxed in canada, at your marginal rate. Your SS will be reduced by some factor (see WEP) when you begin taking CPP. So while it will be taxed less when you are no longer working, you will also receive less (but by waiting your SS will grow).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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