I am a US citizen living in Colombia a year ago. I receive my pension from Colombia government. I have to declare this income to the IRS? This income is taxable in USA?

[DanielV01 · Accepted solution]

It depends.  If you are a U.S. Citizen, in general you are taxed on all of your worldwide income on your U.S. tax return, and that would include your pension from Colombia.  There are, however, exceptions and provisions to limit or eliminate U.S. taxation on the income.  Here are a few of those:

• Tax treaty.  If a tax treaty exists between Colombia and the United States on this income, it is possible that the income is exempt.  (You would have to do research to see if a treaty exists that excludes this income).

• Foreign income exclusion.  If you were living outside of the United States for a period of 330 out of 365 days within a 12 month period, you are allowed to exclude Foreign income received during that time frame (up to the  yearly exclusion limit) from your U.S. return.  The exclusion is available on Form 2555, which you can access by typing "2555" into the Search box and then clicking on the Jump to Form 2555 link.

• Foreign tax credit.  Even if you do not qualify for the income exclusion, if Colombia taxes your pension, then you may receive a credit on your US tax return for taxes paid to Colombia on the pension.  This credit can be claimed on Form 1116.  Similar to Form 2555, you can access this in TurboTax by typing "1116" into the Search box, and then clicking the Jump to Form 1116 link.

Otherwise, the U.S does require you to include this income on your return, but if you qualify for one of these three treatments, you may be able to reduce and even eliminate U.S. tax on this income.

[karol.joya]

Thank you Daniel. some additional considerations:
- Colombia does not have tax treaty with United States.
- The IRS Publication 54 says the exclusion apply only over Foreign earned income and the pensions are categorized like unearned income. this publication does not say anything about the taxes over unearned incomes for a foreign source when you living abroad.
- In Colombia the pension does not pay taxes.

Thank you for your help

[chriso17]

Hi Karol,

Did you ever get this issue resolved? If someone receives a government pension from Colombia, that is not taxed in Colombia, is it subject to US income taxes?

Thanks,

Chris 

[DanielV01]

@chriso17  You have responded to an older thread.  In order to answer your question more completely, please feel free to post a new question.

Having said this, a U.S. Citizen,  Resident Alien, or anyone who is taxed as a U.S. resident must declare income from all worldwide sources.  Some income may qualify for certain exclusions or credits.  In this case, the pension income from Columbia would be taxable in the United States if the taxpayer is a U.S. Resident Return (Form 1040).  This income would not be excludable under the Foreign Income Exclusion provision.  Since the pension is not taxed in Columbia, it would also not qualify for the Foreign Tax Credit.

However, a U.S nonresident alien, filing Form 1040NR, would not need to include this income in the tax return because a nonresident alien will only pay tax on income that is earned or sourced in the United States, which is not the case with a Foreign Pension.