nun

All good questions.....I bet the SSA would just ask for the amount of the non-SS income in the year you applied for SS and use that for WEP.

Disenchanted

The SSA don't want you to retire. They'd love it if you kept on working and paying in until you dropped dead, then they wouldn't need to pay you any SS pension.

A win-win for them.

durham_lad

Exactly

We are just starting our 7th year of retirement, after retiring at age 55, and it certainly beats the bejeebers out of working.

rogerpenycate

one thing I found is that I (seemingly) can 'earn' $100,000 in foreign (UK) earnings before pay tax.I also don't consider that I 'earned' my pension during the time I have lived in the US.It was money I paid into the UK State pension scheme before I came here.All I am doing (effectively) is getting it back ??

mrken30

I could never understand my old boss wanting to work till he was 70. He had paid off his mortgage 20 years ago and was making $140-$150k a year just going into the bank.

theOAP

Do you meet the requirements of US Code Section 911, mainly either for physical presence abroad or for bona fide residence abroad? Is the income earned income only? Paid pension benefits are not earned income.
At the time of "earning" the pension, did you file a US return 1040 declaring all contributions you made to the pension, all contributions any employer made to the pension, and any yearly growth in the fund?

rogerpenycate

2015 is my first year of getting my UK state pension and during the 14 years I've been here I didn't make contributions into the pension.
Re the $100K I just noticed it somewhere in my 'research' and I'm not sure what it referred to.
Thank you for your help

theOAP

I don't mean to be presumptive, but I had the feeling the info from your accountant came as a bit of a shock, and there are things you don't quite understand regarding this situation. Then us lot, a bolshie bunch of strangers on the internet, told you the accountant was basically right. At the same time, you've read about "a treaty and it says that if I don’t have topay tax on any earnings in the UKI don’t have to pay tax on it here",.... "I (seemingly) can 'earn' $100,000 in foreign (UK) earnings before pay tax",....and the thought "It was money I paid into the UK State pension scheme before I came here." None of this makes sense to you. That's understandable.

You've also mentioned "I had no idea I had to declare pension income, either state or private and have also been receiving 2 x $600 (approx) for 14 years (since I've been here !!" It's this bit that also caught my eye.

Start with the UK State pension. According to the treaty, someone in your position (US resident for tax purposes) will pay tax to the US on the UK State pension. I'll provide a link to the "Technical Explanation" of the treaty. It's easier to read and understand than the treaty alone. You're looking for Article 17.

https://www.treasury.gov/resource-ce...ts/teus-uk.pdf

The US taxes on worldwide income. If you were in the UK, paying tax on the arising basis, it would be exactly the same. The UK would tax you on worldwide income. I live in the UK. I have pensions from France, and the UK tax me on them because I'm resident in the UK. Generally (and there are exceptions), it doesn't matter how the income came about, you're taxed on it because you're a resident for tax purposes. The UK taxes me on the UK State pension and the US also taxes me on the UK State pension because I'm a US citizen (USCs are deemed resident in the US for tax purposes). I have ways around it, because of my physical residence, but you don't since you're physically resident in the US, and the UK deducts no tax from the pension.

There are ways to reduce tax on foreign pensions by establishing a basis in the pension (already paid tax to US at time of employment). In your case, this didn't happen because you were not yet (I assume) a US Person. In any case, unless we're discussing voluntary contributions, establishing a basis in the UK State pension is impossible due to NI class 1 contributions being for more than the pension alone.

As for the "$100K [you] just noticed [.] somewhere in [your] 'research", yes, for some people, they can have $100,000 of UK income free of US tax, BUT, you have to be resident outside the US (like me) for the better part of the full year for this to apply (search for FEIE). Also unfortunately, this only applies to earned income (wages related), not pensions.

This may help to get you started to understanding. If, and when, more questions pop up, come back and ask us.

And don't forget about WEP.

theOAP

I've only come back to this, but ran out of time to edit the above. So here's the edited version.

Concerning the 2 x $600 income, the US taxes on worldwide income. If you were in the UK, paying tax on the arising basis, it would be exactly the same. The UK would tax you on worldwide income. I live in the UK. I have pensions from France, and the UK tax me on them because I'm resident in the UK. Generally (and there are exceptions), it doesn't matter how the income came about, you're taxed on it because you're a resident for tax purposes. The UK taxes me on the UK State pension and the US also taxes me on the UK State pension plus the French pensions, because I'm a US citizen (USCs are deemed resident in the US for tax purposes). I have ways around it, because of my physical residence, but you don't since you're physically resident in the US, and the UK deducts no tax from the pension.

mrken30

Do you happen to know the situation with regards to rental income and living in the UK. This sounds scary

Such passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the "net rent" received.

nun

Where's the rental, what is the residence and citizenship of the owner? Even if there is 30% withholding (and I doubt that for US/UK taxes on US/UK residents) you get to apply withholding to your tax bill.

mrken30

Rentals in both US and UK, just curious what the situation would be if I lived in the UK.

nun

The DTA (Article 6) gives primary the right of taxation on rentals to the residence country, but if you live in one country and own a rental in the other you'll still have to comply with the tax rules in the other country as you have source income in that country, but you'd be able to apply FTCs for the tax you paid to your residence contry against any tax due.

mrken30

In otherwords it may get complicated, because tax rule for rentals in the US are very different to the UK. Depreciation being just one difference.

Levans

My wife is 63 just claimed her uk state pension , we have lived here in the USA for 18yrs we have duel citizenship , my wife will claim her US social security in 3 yrs , will her uk state pension affect her US social security when she claims , we will have lived here for 21 yrs , also do we have to pay tax on our Uk pension . Thank you for any help you can give us , we are new to this site why did it take us so long to find it , it looks a great site and we look forward to using it a lot more .