UK state pension and USA social security
#1456
Lost in BE Cyberspace
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Re: UK state pension and USA social security
So if one is resident in UK, US social security only taxed in USA ? Is it reported in UK ?
#1457
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Re: UK state pension and USA social security
We are US/UK citizens living in the UK and the US Social Security is not taxed in the USA but is taxed in the UK. On the 1040 in the US return it is reported but is not taxed, in the UK it is reported and taxed as a foreign pension. Not done this yet but am pretty sure that is how it is.
#1460
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Re: UK state pension and USA social security
You are right of course but HMRC have made it simpler from 2017 on, they used to only tax 90% of foreign pensions but now they tax it all.
IRA, Roth IRA, 401k...., lump sums, periodic payments, Roth conversions, SS WEP, all a constant source of debate and uncertainty.
#1461
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Joined: Jul 2016
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Re: UK state pension and USA social security
It can also be challenging (sorry, couldn’t resist).
You are right of course but HMRC have made it simpler from 2017 on, they used to only tax 90% of foreign pensions but now they tax it all.
IRA, Roth IRA, 401k...., lump sums, periodic payments, Roth conversions, SS WEP, all a constant source of debate and uncertainty.
You are right of course but HMRC have made it simpler from 2017 on, they used to only tax 90% of foreign pensions but now they tax it all.
IRA, Roth IRA, 401k...., lump sums, periodic payments, Roth conversions, SS WEP, all a constant source of debate and uncertainty.
Haven't even started to look at distributions from IRA and 401k, let alone effect of distributions from country without tax treaty with UK.
#1462
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Re: UK state pension and USA social security
In my case I will be WEP’ed to the max based on my 2 UK private pensions, and I don’t have 30 years of SS contributions, only 23. (I wasn’t going to work another 7 years just to avoid WEP)
#1463
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Re: UK state pension and USA social security
From discussions I have seen you can calculate the OAP sum you get from work as opposed to voluntary contributions. e.g. OAP received is £150/week based on 30 years of contributions of which 15 years were paid for by after tax voluntary class 2 or 3 contributions means that only £75/week should be used in the WEP calculation.
In my case I will be WEP’ed to the max based on my 2 UK private pensions, and I don’t have 30 years of SS contributions, only 23. (I wasn’t going to work another 7 years just to avoid WEP)
In my case I will be WEP’ed to the max based on my 2 UK private pensions, and I don’t have 30 years of SS contributions, only 23. (I wasn’t going to work another 7 years just to avoid WEP)
#1464
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Re: UK state pension and USA social security
If you are resident in the US and receive US SS, it is only taxed at 85% maximum. I have a question: on the worksheet for line 20b (taxable amount of SS) you use box 5, net benefits, for the amount taxable in the calculations. For those of you in the US, has box 5 been reduced by the deductions for Medicare Parts b ( if applicable), etc.? In other words, if you have no other benefits repaid (box 4), does box 5 = box 3?
For the resident in the UK, you use box 3 (or box 5 if it you wish - it makes no difference), benefits paid, on line 20a for the US 1040 return (and $0 for 20b). For the SA 106 UK return, and if box3 = box 5, you will use the total of the 12 monthly (UK tax year) payments (and since it is paid in £s, the exchange rate is not a factor) for the amount of US SS received.
As mentioned above, if the US SS benefit has been WEPed, it's a reduced amount. HMRC then tax you on 100% of this reduced amount (£ equivalent of boxes 3 and 5), so 15% above the maximum in the US. When you prepare your form 1040 for the IRS, you will not be able to take a tax credit for the amount of tax paid to the UK for the SS benefit. (1116 - you may only take credits for comparable taxable income and US SS is not taxable). You perhaps pay UK tax at the 40% rate.
OR questionably, and I don't expect anyone to admit to this, you could claim for UK purposes only the amount of £s received in the UK - disregarding the fact that it could be 'lite' by any deductions made for Medicare Parts B, etc.
In the Treaty, Social Security is covered in Article 17(3) which is excepted from the saving clause by Article 1(5)(2).
So, for the USC in the UK, it's probable the US SS has been WEPed, it is taxed in the UK (for some, including a 40% rate) on an additional 15% (over the US resident), and the tax paid can not be used as tax credits on a 1040/1116 return. It's not that I'm bitter.
(I'm really not bitter, it's just the way it is and I don't mind paying UK tax since I live here. - And, I don't have Med Part b, etc.)
#1465
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Posts: 1,117
Re: UK state pension and USA social security
I'm glad someone reminded us that filing the US return is simple.
#1466
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Posts: 8
Re: UK state pension and USA social security
I wanted to make a comment about a post from earlier which I cannot locate.
I am UK resident and a non-US person. My US tax advisor has told me that periodic pension payments (such as from US social security) are taxable in the UK only in my case. He said that he suggests (he would, wouldn't he?) that I report to IRS, but that there is no obligation to do so. I guess it would just make things easier in the event of IRS questions if you did report to them. Since he is a CPA who specialises in this field, I assume he knows what he is talking about and I have full confidence in him. Just thought I would share this.
I am UK resident and a non-US person. My US tax advisor has told me that periodic pension payments (such as from US social security) are taxable in the UK only in my case. He said that he suggests (he would, wouldn't he?) that I report to IRS, but that there is no obligation to do so. I guess it would just make things easier in the event of IRS questions if you did report to them. Since he is a CPA who specialises in this field, I assume he knows what he is talking about and I have full confidence in him. Just thought I would share this.
#1467
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Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: UK state pension and USA social security
I wanted to make a comment about a post from earlier which I cannot locate.
I am UK resident and a non-US person. My US tax advisor has told me that periodic pension payments (such as from US social security) are taxable in the UK only in my case. He said that he suggests (he would, wouldn't he?) that I report to IRS, but that there is no obligation to do so. I guess it would just make things easier in the event of IRS questions if you did report to them. Since he is a CPA who specialises in this field, I assume he knows what he is talking about and I have full confidence in him. Just thought I would share this.
I am UK resident and a non-US person. My US tax advisor has told me that periodic pension payments (such as from US social security) are taxable in the UK only in my case. He said that he suggests (he would, wouldn't he?) that I report to IRS, but that there is no obligation to do so. I guess it would just make things easier in the event of IRS questions if you did report to them. Since he is a CPA who specialises in this field, I assume he knows what he is talking about and I have full confidence in him. Just thought I would share this.
Your situation may be different?
#1468
Just Joined
Joined: Dec 2017
Posts: 8
Re: UK state pension and USA social security
My situation in relation to US source income is currently that I draw occasional lump sums from US IRA (which I declare to IRS and pay tax on). I am in process of starting drawing US Social Security, which is taxable in UK only for me. From what you are saying it would seem that I shall only need to report to IRS in years when I draw BOTH Soc Sec AND IRA lump sums?
#1469
Lost in BE Cyberspace
Joined: Jul 2016
Posts: 9,993
Re: UK state pension and USA social security
Since this is a thread on Social Security:
If you are resident in the US and receive US SS, it is only taxed at 85% maximum. I have a question: on the worksheet for line 20b (taxable amount of SS) you use box 5, net benefits, for the amount taxable in the calculations. For those of you in the US, has box 5 been reduced by the deductions for Medicare Parts b ( if applicable), etc.? In other words, if you have no other benefits repaid (box 4), does box 5 = box 3?
For the resident in the UK, you use box 3 (or box 5 if it you wish - it makes no difference), benefits paid, on line 20a for the US 1040 return (and $0 for 20b). For the SA 106 UK return, and if box3 = box 5, you will use the total of the 12 monthly (UK tax year) payments (and since it is paid in £s, the exchange rate is not a factor) for the amount of US SS received.
As mentioned above, if the US SS benefit has been WEPed, it's a reduced amount. HMRC then tax you on 100% of this reduced amount (£ equivalent of boxes 3 and 5), so 15% above the maximum in the US. When you prepare your form 1040 for the IRS, you will not be able to take a tax credit for the amount of tax paid to the UK for the SS benefit. (1116 - you may only take credits for comparable taxable income and US SS is not taxable). You perhaps pay UK tax at the 40% rate.
OR questionably, and I don't expect anyone to admit to this, you could claim for UK purposes only the amount of £s received in the UK - disregarding the fact that it could be 'lite' by any deductions made for Medicare Parts B, etc.
In the Treaty, Social Security is covered in Article 17(3) which is excepted from the saving clause by Article 1(5)(2).
So, for the USC in the UK, it's probable the US SS has been WEPed, it is taxed in the UK (for some, including a 40% rate) on an additional 15% (over the US resident), and the tax paid can not be used as tax credits on a 1040/1116 return. It's not that I'm bitter.
(I'm really not bitter, it's just the way it is and I don't mind paying UK tax since I live here. - And, I don't have Med Part b, etc.)
If you are resident in the US and receive US SS, it is only taxed at 85% maximum. I have a question: on the worksheet for line 20b (taxable amount of SS) you use box 5, net benefits, for the amount taxable in the calculations. For those of you in the US, has box 5 been reduced by the deductions for Medicare Parts b ( if applicable), etc.? In other words, if you have no other benefits repaid (box 4), does box 5 = box 3?
For the resident in the UK, you use box 3 (or box 5 if it you wish - it makes no difference), benefits paid, on line 20a for the US 1040 return (and $0 for 20b). For the SA 106 UK return, and if box3 = box 5, you will use the total of the 12 monthly (UK tax year) payments (and since it is paid in £s, the exchange rate is not a factor) for the amount of US SS received.
As mentioned above, if the US SS benefit has been WEPed, it's a reduced amount. HMRC then tax you on 100% of this reduced amount (£ equivalent of boxes 3 and 5), so 15% above the maximum in the US. When you prepare your form 1040 for the IRS, you will not be able to take a tax credit for the amount of tax paid to the UK for the SS benefit. (1116 - you may only take credits for comparable taxable income and US SS is not taxable). You perhaps pay UK tax at the 40% rate.
OR questionably, and I don't expect anyone to admit to this, you could claim for UK purposes only the amount of £s received in the UK - disregarding the fact that it could be 'lite' by any deductions made for Medicare Parts B, etc.
In the Treaty, Social Security is covered in Article 17(3) which is excepted from the saving clause by Article 1(5)(2).
So, for the USC in the UK, it's probable the US SS has been WEPed, it is taxed in the UK (for some, including a 40% rate) on an additional 15% (over the US resident), and the tax paid can not be used as tax credits on a 1040/1116 return. It's not that I'm bitter.
(I'm really not bitter, it's just the way it is and I don't mind paying UK tax since I live here. - And, I don't have Med Part b, etc.)
#1470
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Joined: Jul 2007
Location: North Norfolk and northern New York State
Posts: 14,457
Re: UK state pension and USA social security
Exactly. I pay my Medicare Pt. B every month. Now, in my case, I spend maybe seven months a year in the UK and five months (or so) in the US. But even if I'd fully relocated to Britain, I think I'd keep on paying Pt. B, at least for a few years - in case I changed my mind and moved back to the US. Remember there's a penalty, for each year you're eligible and don't pay, there's a cumulative 10% increase in the Medicare Pt. B premium.