Canada resident, US person - T4 income vs US wages - subtracting pension contributions

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
pokka
Posts: 29
Joined: Sat Feb 27, 2021 10:16 pm

Canada resident, US person - T4 income vs US wages - subtracting pension contributions

Post by pokka »

Hi!
I am a US person, living in Canada.
I get at T4 from my Canadian employer with a Registered Pension Plan.
The income there shows as X.
I contributed Y to my RPP.
So for my canadian taxes, I get taxed on X - Y.

On my US taxes, when they ask for wages, should I write X or X-Y? I used to think it was X, but now I think it is X-Y (Because of the treaty, article 13 or something like that).
This is analogous to what happens on a W2 in the US - where they list federal income, it already has the 401k contributions subtracted off.

Is this correct?
Thanks!
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canada resident, US person - T4 income vs US wages - subtracting pension contributions

Post by nelsona »

Yes, but realize if you choose this option, you will be making your entire Cdn pension taxable in US in future, rather than being able to exclude the undeducted contributions. You can choose either/or and keep track of it. It should not make a difference in the long run since it is unlikely that you will be taxed higher in US than Canada when the time comes. but you never know. On the other hand, it is unlikely that you are paying any US tax on your wages, even if you do not deduct your pension contribution.

The treaty article is XVII, para. 8 and 10. This ALLOWS you to decuct the contribution on your 1040, but does not FORCE you.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canada resident, US person - T4 income vs US wages - subtracting pension contributions

Post by nelsona »

Sorry XVIII -- 18!
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
pokka
Posts: 29
Joined: Sat Feb 27, 2021 10:16 pm

Re: Canada resident, US person - T4 income vs US wages - subtracting pension contributions

Post by pokka »

Ah, thanks so much!

I guess it will make a difference if I ever live in the US and take distributions from my Canadian pension then. Then I will primarily be paying tax to the US, and having some US-tax-free income would be nice.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canada resident, US person - T4 income vs US wages - subtracting pension contributions

Post by nelsona »

Well, you Cdn pension will be taxes at 15% flat, but having less US taxable can help with the credit "meshing".
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Post Reply