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QUESTION:
I am a landed immigrant in Canada and a US citizen. The great bulk of my
income is from US pensions and social security. From a Canadian perspective,
are these pensions part of my "global income" and are they taxed the same
way as any other earned income?
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david ingram replies:
When living in Canada as a Permanent Resident or even as an extended visitor, if your intention is to remain here and you are here for more than 183 days, you become taxable on your world income which includes wages, rents, dividends, company pensions, Social Security and interest. I left interest to the last because even US Tax free municipal interest becomes taxable in Canada.
Properly, your US company pensions which could be from CREFF or TIA are taxed in the US at 15% first and in Canada at whatever your tax rate becomes. If the pensions are very large, the calculated tax is more than 15% if you are a US citizen and you have to adjust the tax through the use of foreign tax credits on form 1116. I will tell you that it took me something like eight days to figure this part out the first time and prepare paperwork that the IRS would accept without question. I can also tell you that I have never seen this calculation come into my office done properly by anyone else. Since the treaty is now in its 24th year, I have seen a lot of returns come and go,
Your social security is another problem. You have to report it on your US return and then remove it by treaty. You will convert it to Canadian funds and report it on Line 115 of the Canadian T1 Return. You will then deduct 15% of the amount on line 256 and quote the US / Canada Income Tax treaty.
Canada will always tax the full 85% of the pension. If you were still a resident of the US, the IRS taxes "up to" 85% of the pension. In general, if your income for the year is less than $25,000, you will not pay any tax to the US on your Social Security. In Canada, in general, 85% becomes taxable although if you were 66 and your sole income was a $1,000 a month (CDN) from Social Security, your personal exemption amounts would be enough to wipe out any tax on it.
Happy to look after you. We specialize in Cross Border, Trans Border expatriate types of income tax returns.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321
[email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
This from "ask an income tax and immigration and bankruptcy expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
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David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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