There seems to be a lot of confusion over the matter of whether a UK Government Pension is tax free in the US.
I am not clear why it should be because I don't think it is tax free in the UK. The confusion may arise because in many cases the UK Government pension is below the individual tax free allowance. A person who is resident in the UK would be taxed on their world wide income including UK government pension less the individual tax free allowance. The fact that the UK government pension is usually paid without tax deducted does not necessarily mean it is all tax free. In believe that a person who's only income was a UK state pension that exceeded the personal tax free allowance would be taxed on the balance by which the tax free allowance was exceeded. Negating the UK state pension in the miscellaneous income section of turbotax seems to be a very risky process unless the DTA can be interpreted as meaning that the tax free allowance (Tax deductible USA) can be added to the US tax deductible.
