Form 1116

[Bernadett01]

I am a US citizen, resident of Canada. I understand that Cpp/OAS do not have to be included on my 1040, as per US / Canada treaty. On form 1116, are these govt pensions included on 1 a?
Also, how do I calculate part 2, foreign taxes paid? Some of my income was taxed, and some, including CPP/OAS, were not, and now I have tax owing. So do I include the total tax I will pay in Canada, even on pension benefits that are not taxed by the US?

[nelsona]

CPP/OAS/SS are simply excluded from reporting on your 1040. So there is no need for any 1116 for these items, since there is no US tax to recover.

[Bernadett01]

I called the tax help line for the IRS. I was told not to include the CPP/OAS on the 1040, but include it on Line 1a on form 1116, gross income from sources within Canada. The rest of the form helps calculate the appropriate tax credits.

[nelsona]

Yes, you could do that, but realize that there is no US tax to claim against. You will be building up some FTC for POSSIBLE future use, but will not get any credit this year, as none of it was taxable in US. The GROSS amount on line 1a of 1116 would still be ZERO, but you would have Cdn tax to report, and save for future (unless you have other Cdn income to report as general income.)

But from a mechanical point of view if you do nit include it on your return, how will you claim that it is foreign INCOME?