Where to enter foreign pension income and foreign tax credits?

[ChasinSF]

Yes mine also is direct deposit in the U.S. Up until October they arrived at the end of the month, but my Nov one did not get deposited until 12/2 and my Dec one 1/2/25. I don't think it makes any difference as you can just elect to include it in your 2024 tax year. I believe it is more related to when it was sent and not when you actually receive it. If it comes in 2025 you can always declare it in FY25 and then the amount list on the NR4 will match again as the Dec 25 one won't arrive until Jan 26.

[TexasTea]

Thanks @ChasinSF -- it's good to know I'm not the only one who experienced that change with OTPP!  My first inclination was to include the Dec payment in 2024 income despite it's Jan 2025 arrival.  I figured no one at the IRS would ever ask or care about me choosing to report that income early.  I even posted in this forum about it, hoping for someone to say "yes, do it, no problem!"   But all I got was one response confirming that the right way to do it is to shift that December payment into 2025...  so I've been stewing about that for a while and still haven't decided what I'm going to do.  🤔

[ChasinSF]

@TexasTea I get royalty checks here in the US and sometimes they come in the next tax year for sales recorded in the prior year, so I just count them in the prior year since they are paying for sales that occurred then not in the next year. I would just ask an accountant what is the best course of action but really, I don't think the IRS cares when you report it as long as you report it.

[AmyC]

As a cash basis taxpayer, the income is declared when you actually receive the income. See About Publication 538, Accounting Periods and Methods. 

@TexasTea not sure what you are, cash or other. Thus, the pub to help.

[TexasTea]

Thanks @AmyC for taking the time to respond.  I'm a cash basis filer, and I had previously reviewed the docs you referenced and concluded, like you, that the Jan 2 deposit should be reported as 2025 income.

I was hoping there might be some kind of exception in the context of foreign income, partly because a cash basis filer is allowed to elect the accrual method for foreign tax credits.  (It's a check box on Form 1116, based on section 905 of the tax code, that says foreign tax credits may "at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books, be taken in the year in which the taxes of the foreign country or the possession of the United States accrued".)     I thought perhaps if I made that election on Form 1116 that it might also mean that I could report the matching foreign income on Form 1116 on an accrual basis.   But since my prior post I did a  deep dive on that issue and concluded that it is only the foreign tax, and not the foreign income, for which I could elect accrual.

For 2024, electing to report the foreign tax on an accrual basis, while reporting the income on a cash basis, would increase my foreign tax credit by several hundred dollars (because I would be reporting 11 months of pension income, but 12 months of foreign tax accrual).  It's tempting to do that, although I'm reluctant partly because once I make that election I'm locked in to doing it in all future tax years, and partly because the savings in 2024 will eventually be offset when the timing difference of 2024 is resolved.  So the only true savings will be the time-value-of-money until that happens.

So I've accepted that I need to report 11 months of pension income in 2024, but I'm still undecided about which choice I'll make regarding the accrual of the taxes.

[AmyC]

Since you are on the fence, choose the method that will be easiest to keep track of and explain, if the IRS asks questions.  

I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s, your  carryover information, and proof of your basis in your various investments. You must keep tax records  from the time you purchase until sold/ loss used plus 3 years. It is very easy to lose track of disallowed losses, carryforwards,  and basis. This can be a digital or paper notebook. This will help track and prove whichever method you pick.

[yurigul]

I have similar problem with reporting my foreign Social Security pension. Have you find any solutions?

[yurigul]

Could you please clarify how you enter in TT your German Social Security pension (SS-pension). I understand that German SS-pension shall have the same tax breaks as US SS-pension. But not clear how you claim a reduced tax for it in frame of TT.

Thanks!

[LJC3]

Foreign Social Security should be converted to U.S. Dollars and added to any U.S. Social Security income and the total entered on line 6a (Social Security Benefits). Any foreign pension should be converted to U,S. Dollars and the gross amount entered on schedule 1 under other income. For any foreign tax paid you must fill out Form 1116 to claim a foreign tax credit.

[rapunzelX75]

I would be very careful adding any foreign social security income on top of US Social Security Income on the tax form.  Foreign Pensions and Foreign Income period and should be entered as such.  My UK Company Pension and also my UK Old Age Gov Pension (equivalent of US Social Security) are both entered as Foreign Income and fully taxed.  As my UK Gov Pension is a State Pension it is not reported to FinCen.  However my UK Private Pension is reported as a Foreign Account to FinCen.

[yurigul]

This will not work correctly unfortunately. TT on its Social Security Benefits Worksheet does not allow to enter separately US and foreign Social Security-pensions (SS-pension). As a result, TT will consider the total income from both US and foreign SS-pensions (in my case German) as 100% US Social Security payments. And therefore TT will apply incorrectly 0% tax rate to my German SS-pension - TT knows that US SS-pension is not taxed by the US for the US citizens leaving in Germany. Any ideas on how to solve this problem?

[rapunzelX75]

Yurigul,   I entered my British equivalent of Social Security (The UK Old Age Government Pension) as additional income and back in this LONG thread there are discussions about how to do this.  I have now done it for 3 years running and my UK Gov Pension is taxed as income.  I do not get taxed at source for my UK Government Pension or my UK Private company pension as I set them up with the UK Income Tax Authorities to be non-taxable, so I have no foreign tax credits to account for.

You might want to consider either reading the entire thread on this topic or just get with TT and pay the required support time charges to answer your questions.   I did that the first time I had the question about where to input foreign pension income and unfortunately you have to screw around a bit with TT to enter the data.  If I recall you actually have to enter a "made up" W9 number to get it to work, but it's in the thread somewhere.  Unfortunately I just don't have the time to pull my files and go back into the input data.

All the best to you as you hunt for the answer.

[BernardOng]

yurigul,

I found out the hard way that different country pension have different tax treatments depending sometimes on the treaty between the US and that country. If you're asking about German Pension entries. Maybe this would help - just do more research and double check the procedures below if it makes sense.

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Here’s how to enter a German Social Security pension (gesetzliche Rente) in TurboTax. The U.S. generally taxes German statutory Social Security in the same way as U.S. Social Security, so you’ll enter it in the Social Security (SSA-1099) section, not as a 1099‑R.

Before you start

• Gather your German pension statement (e.g., Rentenbezugsmitteilung/Leistungsmitteilung) showing total benefits and any repayments.
• Convert the total to U.S. dollars. Use either:
• If Germany withheld any tax, note the amount in USD. Because of the U.S.–Germany tax treaty, that tax often isn’t creditable in the U.S.; you may need to seek a refund from Germany instead. If you’re unsure, you can try the Foreign Tax Credit section and see if TurboTax allows it.

Federal return steps

1. Open your return and go to Federal.
2. Wages & Income.
3. Scroll to Retirement Plans and Social Security.
4. Click Start or Revisit next to Social Security (SSA‑1099, RRB‑1099).
5. When asked if you received Social Security benefits, select Yes.
6. Add SSA‑1099.
   • Payer’s name: Enter German Social Security or Deutsche Rentenversicherung.
   • Box 5 (Net benefits): Enter your total German Social Security benefits in USD.
   • Federal income tax withheld: Leave $0 (Germany isn’t U.S. withholding).
   • Medicare premiums: Leave blank/zero (German health insurance is not U.S. Medicare).
   • If you repaid benefits, enter the repayment in the appropriate box.
7. Lump-sum catch-up: If you received a lump sum that includes prior-year benefits, check the box I received a lump-sum Social Security payment and enter the amounts by year. TurboTax will apply the special lump‑sum election to potentially reduce your tax.
8. If filing jointly and your spouse received German or U.S. Social Security, add a separate SSA‑1099 entry for your spouse.
9. Continue. TurboTax will compute the taxable portion (0–85%) based on your overall income.

Foreign tax paid to Germany (only if applicable)

• If German income tax was actually withheld from the pension:
  1. Go to Deductions & Credits.
  2. Find Foreign Tax Credit and start it.
  3. Country: Germany.
  4. Category of income: Generally General category income for pensions.
  5. Enter the foreign taxes paid (USD) and the tax year.
  6. Follow the prompts. TurboTax will determine whether you can claim the credit or need Form 1116.
• Important: Due to the treaty, German tax on German Social Security paid to a U.S. resident often isn’t creditable; the correct remedy can be a refund from Germany. If TurboTax disallows the credit or you’re uncertain, consult a tax professional.

State return steps

1. After finishing Federal, go to State and start your resident state.
2. TurboTax carries your Social Security amounts into the state return automatically and applies your state’s rules:
   • Many states fully exclude Social Security; some allow partial exclusions or phaseouts.
   • If your state asks to confirm Social Security amounts, the software usually fills them in for you.
3. Complete any state-specific questions and finish the state interview.

What not to do

• Don’t enter German statutory Social Security as a 1099‑R or “Other income.” Use the Social Security (SSA‑1099) section.
• Don’t enter German health insurance premiums as Medicare premiums. If you itemize and meet the medical expense threshold, you may include German health insurance under medical expenses instead.

If it’s not German Social Security

• Occupational/company pensions (Betriebsrente) or private annuities (private Rente) are not Social Security. Enter those in the 1099‑R/pension section as a foreign pension (you’ll enter without a U.S. 1099‑R and provide the details manually). These are generally taxed differently from Social Security.

Tips

• Keep your exchange-rate documentation and the German pension statement with your tax records.
• If you also receive U.S. Social Security, enter it as a separate SSA‑1099; TurboTax will combine them.
• If you got a German lump-sum that includes multiple prior years, use TurboTax’s lump-sum Social Security workflow to check for a lower tax result.

That’s it—enter it in the SSA‑1099 area, finish Federal, then let TurboTax carry it to your state return and apply your state’s rules.

Hope that helps. Just do more research to confirm the steps make sense.

Good luck.