Taxation of pensions

BenR · Post by **BenR** » Mon Apr 12, 2010 5:13 pm

I've been unable to find an answer to this specific question. Sorry if I overlooked anything.

I am a dual US/Canadian citizen, now living in Canada. I have begun receiving monthly payments from some company pensions established while working in the US. I've read the tax treaty, particularly Article XVIII Pensions & Annuities and Article XXIV Elimination of Double Taxation, as well as the instructions for Form 1116. It is still not at all clear to me how to handle the pension income. I assume I start by entering it on my Canadian return as income. Do I then declare it as pension income on the US return but claim tax credit on Form 1116? Is it active or passive income? The definitions of those terms in the 1116 instruction do not mention pensions at all.

nelsona · Post by **nelsona** » Tue Apr 13, 2010 8:36 am

You report the pensions on bothe returns.

You then take credit on your Cdn return for the taxes you owe to US on those pensions.

No foreign tax credit is available on your US return for this, since it is not foreign income.

CDn pensions would be the reverse, and claimed on IRS 1116, as general limit income.