I get a UK pension. I am now a US citizen. Can I deduct the contributions I paid into this pension from this income and can I deduct the contributions my employer paid

[ChallengedinCA]

I was born in the UK and have been permanently resident in the US and a US citizen for 20+ years. I now get a UK pension for the years I worked in the UK as a UK citizen before coming to the US. My questions are, for taxable income purposes,  (a) can I deduct the contributions I paid into my UK pension from the taxable income of this pension  and (b) can I also deduct the contributions my employer paid into my UK pension fund from the taxable income of this pension  .  Both the above contributions were made while I was in the UK (and a UK citizen).

[DS30]

It depends-

According to the IRS, your contributions and your employer's contributions to a foreign pension are not part of your cost if the contribution was based on compensation for services performed outside the United States while you were a nonresident alien and not subject to income tax under the laws of the United States or any foreign country (but only if the contribution would have been taxable if paid as cash compensation when the services were performed).

Therefore if the UK pension contribution were made tax free while a UK citizen, then you will not be able to claim any deductions in the US for these UK pension contributions.

Please click this link for more information on IRS - Foreign Pension and Annuity Distributions

If this is a UK governmental pension, you would be able to claim a treat exemption on From 8833 (statement to claim a treaty exemption) which you would attach to your mailed in tax return. You would still include the amount on your return under the social security section but you would also include a negative amount for this UK governmental pension on line 21 and the description should read "Tax exempt under US-UK tax treaty Article 17")

To enter the treaty exemption amount in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") type "other reportable income" in the search bar then select "jump to other reportable income". TurboTax will guide you in entering this information.

[ChallengedinCA]

Thanks.  So if these contributions were made with after tax payments i.e. I had already been taxed in the UK on those contributions, then I could them as a deduction from the income, correct ??   ALso, as this is a UK Government Pension, do I report the income as Social Security income (using SSA-1099) or as Pension income

[DS30]

Since this in a UK government pension, you will be able to claim a treaty exemption for the entire amount. You will report the full amount of the pension under the social security income section and then report the same amount (as a negative amount) as other income on line 21 of your 1040. You will also need to attach a form 8843 (which is not supported by TurboTax) to a file by mail copy of your return.

I have updated my answer to include this additional information.

[ChallengedinCA]

To clarify:  I am permanently resident in the US and now a US citizen.  I can report the UK government Pension as Social Security  (vs pension income).  I do not pay taxes on the UK pension in the UK (since I am permanently resident in the US). Can I still report the negative amount on line 21  ??

[DS30]

Yes, but only to the extent of the UK pension amount that is included as part of your taxable income.

[ChallengedinCA]

Thanks:  BTW did you mean form 8833 (above you noted 8843)

[DS30]

Yes - Thank you 🙂 I have updated my post to include the correct link

[user8856]

Thanks for the info, it was very helpful.

[DSL]

I am US citizen and Receive UK pension and trying to find how the UK and USA treaty helps to reduce taxes on Pension I Receive form UK.  I paid into Voluntary UK pension while I was in US and these contributions were made with funds that already have been taxed in US

Previous comments were very helpful but  if I add the pension from UK to the social security I receive  in US

I am taxes at 85% on Social security the UK pension will also be effected by 85% rate, but if I go to line 21 on form 1040 as mentioned and claim 100% of my pension  as   (-)  now I have calmed total of 115% of my UK pension

Please clarify.

Also I noted that on new 1040 form line 21 is for " Refund you want to apply to next year estimated taxes" Is there a different line where we claim the refund of UK pension

Since we need to complete form 8833 does any one have UK treaty codes for form 8833

line 1 b,   Line 2,  Line 5  and some explanation for line 6

[JohnB5677]

No there is not a place to request your UK Pension, But I did find the US/UK Treaty.

US/UK Treaty . Here is all that I found regarding pensions.

ARTICLE 18 Pensions

(1) Subject to the provisions of paragraph (2) of Article 19 (Government Service), any pension in consideration of past employment and an annuity paid to an individual who is resident of a Contracting State shall be taxed only in that State.

ARTICLE 19 Government Service

(2) (a) Any pension paid by a Contracting State or a political subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if the recipient is a national of and a resident of that State

[Makntak]

I receive a UK governmental pension of less than $10,000/yr so don’t need to file Form 8833. Am I still required to report the amount as income and then include the negative amount on line 21 or should my tax return just ignore the UK pension completely? If I can’t ignore it completely can the line 21 entry only be done by hard copy or is there a way to do it in turbotax?

[DaveF1006]

Yes there is a way to report this in Turbo Tax. Please refer to this Turbo Tax link for the procedure for reporting this in Turbo Tax. please follow these steps as outlined in the article.

1. On the Wages & Income screen, scroll down to Retirement Plans and Social Security.
2. Click the Start/Revisit box next to Social Security (SSA-1099, RRB-1099)
3. Click the Yes box on the screen, Did you receive Social Security or Railroad Retirement benefits in 2019?
4. On the Tell us about the benefits you received screen, enter the amount of your foreign pension in Box 5.
5. Back on the Wages & Income screen, scroll to Less Common Income.
6. Click the Start/Revisit box next to Miscellaneous Income, 1099-A, 1099-C
7. On the next screen, click the Start/Revisit box next to Other reportable income.
8. Click the Yes box on the Any Other Taxable Income screen.
9. On the next screen, enter the amount of your pension as a negative number.  For Description enter “UK pension offset” (or something similar)

[Lcpalmer1]

Makntak, 

While I am also trying to figure this out, I have a question for you.  I started receiving UK State pension in 2020.  Did you receive a tax document from the UK that you will use on your USA tax return? I haven't received anything and have submitted a question to them but response was they would get back to me within 4 weeks. Any help on what you received from UK would be helpful. thanks. 

[AmyC]

Here is a link to the tax treaties. If you do receive a form, you will need to convert it to US dollars. If not, simply enter what you can show as correct, then minus it back out. The advice in this thread is good. I would add that form 8833 will also need to be filed with your state, if you have state tax.

@Lcpalmer1