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Does the U.S. have a Tax Treaty with the U.K. on how to treat Social Security Income from the U.K.?

 
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2 Replies
TomK2023
Employee Tax Expert

Does the U.S. have a Tax Treaty with the U.K. on how to treat Social Security Income from the U.K.?

Yes, the U.S. and U.K. do have a tax-treaty, so Social Security income is taxable only in the country where you reside.
 

You report the U.K. Social Security income by entering it as a Foreign Pension (since you didn't receive a 1099-SSA)

 

Enter Foreign Pension:

  1. Open or continue your return.
  2. Go to Wages & Income under Federal tab, and then Retirement Plans and Social Security.
  3. Select IRS Letter 1099-R, RRB-1099 (even though you don't have one).
  4. Choose "I'll type it in myself" and select "Substitute Form 4852" (or you can also enter it under Miscellaneous Income, and then Other Reportable Income).

Be aware, U.K. State Pensions are 100% taxable in the U.S. as ordinary income (the "up to 85% taxable" rule for U.S. Social Security does not apply).

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jtax
Level 10

Does the U.S. have a Tax Treaty with the U.K. on how to treat Social Security Income from the U.K.?

Yes. See 

 

https://www.irs.gov/businesses/international-businesses/united-kingdom-uk-tax-treaty-documents

 

In particular, look at Article 17 and maybe Article 18.

 

We would need a little more info to provide an opinion, but usually, for a US citizen living in the US, foreign pensions are only taxed by the US. This means the UK should not take out any tax.

 

Unfortunately, even UK social security will not receive the somewhat reduced taxability for US social security benefits under I.R.C. 86 because they are not "a monthly benefit under title II of the Social Security Act" but are rather taxed as any other pension. See https://www.law.cornell.edu/uscode/text/26/86


For a general article about how UK pensions are taxed by the US see this article:

https://www.taxesforexpats.com/country-guides/uk/uk-pension-system.html

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