US Federal Tax on UK Pension Income

[alansaff]

I am a US citizen living in the UK (and have done for many years). I do not receive US SS but am shortly to receive a UK state pension.

Do I need to report this state pension income on my US federal return, together with UK taxes deducted, or is it exempt under the US/UK tax treaty?

I believe it is exempt as IRS Publication 901, page 33 on Tax Treaties states:

“Pensions paid by, or funds created by, the 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. These exemptions do not apply to income or pensions for services performed in connection with a business carried on by the United Kingdom, its political subdivisions, or local authorities.”

I am not a resident and citizen of the United States. If my opinion is correct, it contradicts your earlier advice given when I asked the same question last year. The link below refers:

https://ttlc.intuit.com/community/retirement/discussion/re-federal-tax-on-uk-pension/01/2330723#M234...

[OmM1]

Hi alansaff

could you please clarify "state Pension" is it for the work you did for UK Government or is it for a work done for private businesses but managed by the state?

Thank You

[alansaff]

Hi

Neither. The UK state pension is a federal pension plan, not a private plan for work done, for which contributions are paid by the state and the employee and employer (where relevant) over one's working life. The UK state pension plan is managed by the UK government for its citizens in their retirement. 

[OmM1]

Thank You alansaff,

based on the treaty provision your State Pension income (you being non resident in US) is exempt from US Taxation and will be Taxed by UK only.

Hope this answers your question

[alansaff]

Thank you. Do any forms need to be filed to confirm this? Might these include form 8833? If yes, how is this done on your TT software?

[OmM1]

I believe you are exempted from reporting on form 8833

"• That a treaty reduces or modifies the
taxation of income derived by an
individual from dependent personal
services, pensions, annuities, social
security, and other public pensions, as
well as income derived by artists,
athletes, students, trainees, or teachers;"