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UK LGS Pension and Lump Sum - US Tax

UK LGS Pension and Lump Sum - US Tax

Old Feb 7th 2012, 1:08 am
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Default UK LGS Pension and Lump Sum - US Tax

I am a UK citizen living in the USA with a green card, so a resident alien!
I have just received a pension from a UK Local Government Scheme in the form of a lump sum (I had no choice) and a monthly payment. I would like to know if any of these payments are taxable on my US Federal and State (NJ) returns? Where should I declare these on the forms 1040 and/or 1099 etc. and can I invoke the UK/US Tax Treaty, Page 33 of the IRS Publication 901 on Tax Treaties says:

Pensions paid by, or funds created by, United Kingdom, its political subdivisions, or local authorities for services performed for the United Kingdom are exempt from U.S. income tax unless the recipient is both a resident and citizen of the United States.

Last edited by BrianLR; Feb 7th 2012 at 1:51 am. Reason: additional information
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Old Feb 7th 2012, 3:14 pm
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Default Re: UK LGS Pension and Lump Sum - US Tax

What if I have dual citizenship and reside in the US. Under the LGPS the lump sum is NOT taxable in the UK. Is the lump sum also not taxable in the USA?

Last edited by MHolkham; Feb 7th 2012 at 3:21 pm.
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Old Feb 7th 2012, 4:25 pm
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Default Re: UK LGS Pension and Lump Sum - US Tax

Originally Posted by MHolkham View Post
What if I have dual citizenship and reside in the US. Under the LGPS the lump sum is NOT taxable in the UK. Is the lump sum also not taxable in the USA?
Just because something is not taxable in the UK does not mean it's not taxable in the US. ISA's are not taxable in the UK but their interest is taxable in the US.
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Old Feb 7th 2012, 4:51 pm
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Default Re: UK LGS Pension and Lump Sum - US Tax

If you are a UK citizen living in the US and receive a Government Service Pension from the UK, that pension is only taxable in the UK. My UK police pension was not taxable in the US and my CPA said the lump sum was part of the pension.

If you become a US citizen or dual citizen and live in the US, that pension can only be taxed in the US. When I became a US citizen I informed HMRC and received exemption from UK tax on my UK police pension.

If you receive the lump sum part of the pension after becoming a US citizen and live in the US, the lump sum is taxable in the US.

That is my understanding of the tax treaty, but you may wish to consider taking advice from a tax professional. Peter Newton, who is a member of BE, and an expat comes highly recommended.

Last edited by lansbury; Feb 7th 2012 at 4:54 pm.
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Old Feb 7th 2012, 5:46 pm
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Default Re: UK LGS Pension and Lump Sum - US Tax

Pete Newton does my taxes. You should contact him. www.britishexpatstax.com
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Old Feb 8th 2012, 2:43 am
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Default Re: UK LGS Pension and Lump Sum - US Tax

Originally Posted by penguinbar View Post
Pete Newton does my taxes. You should contact him. www.britishexpatstax.com
Thanks, I will follow up that contact.
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Old Feb 8th 2012, 2:46 pm
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Default Re: UK LGS Pension and Lump Sum - US Tax

Originally Posted by BrianLR View Post
Thanks, I will follow up that contact.
You're welcome!
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