We are a Brit and a Canadian who have been US permanent residents for over 30 years. At the end of last year we moved to Canada where the Brit is now a permanent resident. We have IRA accounts in the US, and for income we have pensions from the UK and US, and Social Security from the US. Our only Canadian based income is interest from a savings account. We have a Canadian mortgage.
We currently pay no UK taxes on our pensions.
From our discussion with Serbinski and poring over this forum, it looks like we will be paying US taxes on all of this income much as we have done before except that we can claim a small tax credit for Canadian taxes on the interest from the Canadian savings account.
In Canada we will also be paying Canadian taxes on all of this income except that we will have a large tax credit for the US taxes paid on US pensions and US social security and any IRA withdrawals.
The Canadian T2209 appears to be concerned with all foreign taxes, regardless of origin. Does this mean that it allows tax credits for the US taxes we pay on our UK pensions?
Avoidance of dual taxation
Moderator: Mark T Serbinski CA CPA
The only issue that you may have trouble with is the UK pension. While US will tax you on it, canada will NOT give you any tax credit for that portion of tax, since you are only paying US tax on it due to your US gc status.
Third-country income is a mess to deal with, especially since you aren't taxed in UK on this pension (why not may I ask?).
The US canada treaty deals primarily with US and Cdn income, so the remedies avaialble for US taxpayers living in Canada don't necessarily apply to the US tax on UK source income.
And as Cdn residents, your SS is no longer taxable in US. It is taxable only in canada by treaty, included only at the 85% inclusion rate like in US.
Third-country income is a mess to deal with, especially since you aren't taxed in UK on this pension (why not may I ask?).
The US canada treaty deals primarily with US and Cdn income, so the remedies avaialble for US taxpayers living in Canada don't necessarily apply to the US tax on UK source income.
And as Cdn residents, your SS is no longer taxable in US. It is taxable only in canada by treaty, included only at the 85% inclusion rate like in US.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks nelsona for the prompt response. Yes, i'd forgotten about US Social Security being taxed in Canada rather thn the US.
Why no taxation in the UK? Another of those tax treaties I guess. For my UK company pension I was given the choice of paying taxes in the UK or the USA, but the UK pension service pointed out that the US would tax the pension anyway, so the choice was a no-brainer. I had to get the IRS to verify to the UK's Inland Revenue that I was actually paying taxes in the US.
For my Canadian wife's UK Government pension the question wasn't even asked and they even paid her pension without any tax witholding directly into a Canadian bank even though she was a US resident at the time.
My own UK Government pension is brand new, one month old, and I'm sure the question of taxation between UK, US, and Canada will be a whole new adventure. As it's a "pension based on income not subject to SS payments", it will also probably reduce my US social security benefits.
Why no taxation in the UK? Another of those tax treaties I guess. For my UK company pension I was given the choice of paying taxes in the UK or the USA, but the UK pension service pointed out that the US would tax the pension anyway, so the choice was a no-brainer. I had to get the IRS to verify to the UK's Inland Revenue that I was actually paying taxes in the US.
For my Canadian wife's UK Government pension the question wasn't even asked and they even paid her pension without any tax witholding directly into a Canadian bank even though she was a US resident at the time.
My own UK Government pension is brand new, one month old, and I'm sure the question of taxation between UK, US, and Canada will be a whole new adventure. As it's a "pension based on income not subject to SS payments", it will also probably reduce my US social security benefits.
The whole Winfall elimination provision of SS is controversial. Some Cdns have been able to use the totalization agreement between US and Canada to prevent WEP from being applied. Keats based in Arizona is an expert on this.
Well, you may need to revisit the UF pesnsion tax at this point, as it may be beneficial to have UK tax on UK source income, as it would be credited to you in both US and Canada.
as I said, I do not see offhand how the US tax you pay on your UK pensions will be credited on your Cdn return. The traety allows canada to deny credit for any US tax that you pay solely due to your being a US citizen or GC-holder. If you were neither, you would not be subject to any US tax, except for the tax associated with any IRAs or US pensions you might have. so none of your US tax other than for that specific income will ever be creditable in Canada.
Your other choice, more drastic is to give up your GC, which may or may not result in breaking US taxation.
Well, you may need to revisit the UF pesnsion tax at this point, as it may be beneficial to have UK tax on UK source income, as it would be credited to you in both US and Canada.
as I said, I do not see offhand how the US tax you pay on your UK pensions will be credited on your Cdn return. The traety allows canada to deny credit for any US tax that you pay solely due to your being a US citizen or GC-holder. If you were neither, you would not be subject to any US tax, except for the tax associated with any IRAs or US pensions you might have. so none of your US tax other than for that specific income will ever be creditable in Canada.
Your other choice, more drastic is to give up your GC, which may or may not result in breaking US taxation.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
That is what I think. As long as the tax rate is not too high(like 15% or less) you should be able to use all the tax as foreign credit. I suspect that you will not file a return in UK, you will have a flat tax withheld end of story.
And keep in mind that even though you take credit for the UK tax on your Cdn return, you can still take credit for it on your US return as well.
And keep in mind that even though you take credit for the UK tax on your Cdn return, you can still take credit for it on your US return as well.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best