DoninGA, thank you for your clear answers. I'm not the original poster, but here's where I'm stumbling.
My wife is a German citizen and has a permanent resident visa ("green card") in the U.S. She receives a German pension (government Social Security equivalent), so I'm THIS CLOSE to reporting her income in accordance with the tax treaty.
The 1989 tax treaty was amended in 2006. If I interpret the amendment correctly, her retirement benefit is subject to U.S. taxes only if she is both a "resident and a "national" of the U.S. (AKA, "the other State").
What, if anything, am I missing?
Thank you in advance for your invaluable contributions to this forum.
Here's an excerpt from the Technical Explanation of the 2006 amendment:
Paragraph 2
Paragraph 2 deals with the taxation of pensions and other similar remuneration paid by, or out of funds created by, one of the States, or a political subdivision, local authority, or instrumentality thereof, to an individual in respect of services rendered to that State, subdivision, authority or instrumentality.
Subparagraph (a) provides that such pensions and other remuneration are taxable only in that State. Subparagraph (b) provides an exception under which such pensions are taxable only in the other State if the individual is a resident of, and a national of, that other State or the pension is not subject to tax in the Contracting State for which the services were performed because the services were performed entirely in the other Contracting State.
Pensions paid to retired civilian and military employees of a Government of either State are intended to be covered under paragraph 2.
