Do I need to report Israel employer pension contributions as income on a US tax return?

[ScruffyCurmudgeon]

As the US has entered into a reciprocal tax treaty with Israel - see here  https://www.irs.gov/pub/irs-trty/israel.pdf,
the treaty provides that in the case of Israel which taxes the pension distribution of residents of Israel, if you are such a resident of Israel, irrespective of US citizenship, then the pension would be taxed in Israel and would not be taxable in the U.S.  Correspondingly, if you are a resident of the U.S. but are recipient of a distribution from a pension in Israel, you would report the distribution in the U.S. and pay tax here, but no tax should be assessed in Israel, and if it was you should seek reimbursement under the treat.

Further documentation:

• https://www.irs.gov/pub/irs-trty/israel.pdf
• https://www.irs.gov/Businesses/International-Businesses/Israel---Tax-Treaty-Documents
• https://www.irs.gov/Businesses/The-Taxation-of-Foreign-Pension-and-Annuity-Distributions

[bh2]

Hey Scruffy_Curmedgeon, thanks for the help! I am asking about the contributions, however, not the distributions. To be clear, I am asking about when an employer matches contributions to a pension plan, are the employer contributions required to be reported as income? Thanks!

[ScruffyCurmudgeon]

That would be an Israel Tax question - as to whether or not Israel taxes employer contributions made by an Israeli employer to a pension.

US Taxation is on the withdrawals only.

[bine22]

In the US contributions to a qualified plan are not taxable, however, Israeli plans are not qualified plans in the sense of the US tax law. So I would strongly assume that the contributions made by the employer are treated just like additional income, so would have to be reported on your US tax return as such.

[ScruffyCurmudgeon]

However, @bine22 - is it the case that the Tax Treaty would provide that if Israel taxes those contributions then they would not be taxable in the U.S.?

[bine22]

Israel does not tax these contributions. However, since they will be included in the gross income for the US, they can be either excluded using the FEIE or be part of the basis for the foreign paid tax credit.

[bh2]

Got it. Thank you both for your help. This was very informative.

[122na1rt]

@bine22  Can you explain why can pension contributions be excluded using FEIE? I read somewhere else that you cannot do that, as it is not considered income, only passive income (talking only about contributions, not distributions)

[122na1rt]

@bine22  Can you explain why can pension contributions be excluded using FEIE? I read somewhere else that you cannot do that, as it is not considered income, only passive income (talking only about contributions, not distributions)

[bine22]

distributions are passive income. But contributions are salary you receive from your employer and are then deposited into the pension

[122na1rt]

@bine22 See instruction of 2555-EZ, quoting: Foreign earned income doesn't
include: Amounts you must include in gross income because of your employer's contributions to a nonexempt employees' trust or to a nonqualified annuity contract.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i2555ez.pdf">https://www.irs.gov/pub/irs-pdf/i2555ez.pdf</a>

[ScruffyCurmudgeon]

this question/answer thread is years old, and @bine22 no longer participates - she is off doing academic work