Is the social security income from the People’s Republic of China taxable?

[shawatam]

How do I report this income in Turbotax? How do I claim tax credit on this income?

[Opus 17]

I'm going to ask for an expert @pk

Are you now a US citizen, green card holder, or resident alien?

In general, if there is a tax treaty with the other country, you have two choices when it comes to social benefit insurance (equivalent to social security).

A. Treat it as social security income in the home country.  Pay tax in the home country according to the home country's rules for social security income.  Leave the income off your US return (this is the "rely on the treaty" strategy.)

B. Ignore the treaty, do not pay tax in the home country, and declare it as "other/miscellaneous" taxable income in the US and pay US tax on it.  

Whether A or B is better in your situation depends on the tax scheme in the home country.  For example, if taxes in the home country are higher on social security than in the US, B might be better.  But if the home country already withholds tax payments and the only way to get it back is to file in the home country, then A might be better.

I don't know if there is a tax treaty with China or what the terms are.  Hopefully the other expert can help. 

[pk]

@shawatam  generally agreeing with the response from my colleague @Opus 17 , and assuming that you are a US person ( citizen/GreenCard/Resident for Tax purposes ), having a tax home in the USA. 

(a) Article 17 & 18  generally deals with remuneration  from the  public funds  of a contracting state.  Thus  in case of US -China tax treaty, Social Security or similar payments  are taxable only by the  "providing "  contracting state or its instrumentalities.  Thus Social Security Equivalent  distribution from China is taxable ONLY by China.

(b)  There being no clean way to do it, a suggestion by  my colleague   DavidF1006 is  useful here.  In this case  you  enter the  total amount of the distribution as "other " income with memo " Social Security  from China " as a positive number  and then follow up with another entry for the same amount  but as a negative number  with the memo  " Not Taxable under US-China Tax Treaty article  17"   The result would show up as two entries  in row z of the Schedule-1.

Ideally this should have been  entered ( but Turbo seems to have no way to do it )   as    follws;

1. Enter the social security amount on   Scehdule-1 -- Part I  "Asdditional Income "   line 8z  -- "Social Security from China "

2. Enter  the Social Security amount again on Schedule-1 -- Part II    " Adjustments to Income"  line 24z -- " Exclusion of Income per US-China Tax treaty article 17 ".

 But of course  the current  way will achieve the results.

Does this help ?

[Opus 17]

@pk 

Note that it is possible to place the negative adjustment on line 24z if the taxpayer is using the desktop version, because they can make a direct entry on the form.   Because Turbotax Online does not allow direct forms access, the only way to make a negative adjustment puts it on line 8z, as you said, which is technically incorrect but seems to be a common workaround.  

[pk]

@Opus 17  thank you -- good to know.