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QUESTION:
I am a U.S. citizen and receive Social Security Disability. I married a Canadian and now live in Canada. In the states, I was not required to file a tax return. Now that I am married and live here what am I to do? I truly have been given 4 conflicting answers to this question and it is making me sick to think I am getting myself in tax trouble.
Thank you
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david ingram replies:
There is only one answer and that is that your social security benefits were taxable in the US and are absolutely (no doubt, no exceptions) taxable in Canada.
As a single person with a social security disability benefit in the states, you were under the threshold of taxation for social security and did not bother filing a tax return because you had no other income.
If, however, you had received $50,000 of investment income, PLUS your SS disability, you would have found that 85% of your social security WAS taxable in the US.
In Canada, you have to convert the amount to Canadian dollars and put it on line 115 of the T1 General Tax return. That same amount then shows up on line 236 of your return and counts against your income for the purposes of your husband's claiming you as an exemption.
Then you multiply the amount on line 115 by 15% and put that amount on line 256 of your return which has the net effect of reducing your taxable income on line 260.
The final result is that you will be taxable on 85% of your social security in Canada.
If the figure on line 260 was less than $8,000 or so, you would not owe any tax to Canada either but your husband would likely have lost you as a dependant or only be able to claim you as a partial dependant.
That is the answer. Report the income.
But!!!! If you happen to be receiving the low income supplemental, that part is not taxable.
More information can be found at:
Publication 915, Social Security and Equivalent Railroad Retirement Benefits
a.. Tax Topic 423, Social security and equivalent railroad retirement benefits
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