It depends. If a tax treaty specifies that your Social Security benefits are only taxable by your foreign country of residence, you generally don't owe US taxes on those benefits. However, you are still required to report the income on your US tax return.
Even if the income is exempt from U.S. taxation under a treaty, the IRS requires you to disclose it on your tax return. You can then claim the treaty exemption to avoid double taxation.
Here is how to report and then exempt under the treaty exemption.
- Log into your account
- Select Wages and income
- Less Common income
- Miscellaneous Income, 1099-A, 1099>start
- Scroll to the bottom of the page to Other Reportable Income
- Other taxable income, answer yes
- Then give a brief description of the income and the amount listed. Here call this Social Security benefit from XXXX (the name of the country) and the amount
- After this entry is made, select add Add Miscellaneous Income Item .
- Here, type Treaty Based Social Security income Exclusion as a description. Enter the amount entered above as a negative number with a minus sign in front of the amount.
Leave this out of Form 1116 as you won't be claiming a foreign tax credit since it won't be taxable US income.
@juham2013
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