Does the gross income in form 1116 include Canadian CPP or OAS

[rogge1722]

From TT's on demand guidance.

Gross income from all sources is GROSS income from ALL sources, both foreign and U.S. Gross income means income without taking into account any deductions or losses.

[Treetops10]

I was referring to gross foreign income on the first line of form 1116 Foreign tax credit. and whether that includes CPP and OAS from Canada.

[rogge1722]

Yes, that would include Canadian pension funds.  It might be a good idea to check the US/Canada tax treaty.  It may contain special tax breaks for pensions.

[Treetops10]

I am not asking about pension funds. I am asking specifically about Canadian government social security benefits called CPP and OAS

[ThomasM125]

The income in part 1 of form 1116 is often from income you would enter when you complete the foreign tax credit routine in TurboTax. You enter your foreign income not reported on a form 1099 separately in TurboTax, in the Foreign Taxes section under Estimates and Other Taxes Paid, in the Deductions and Credits area of TurboTax. That is also where you would enter the foreign taxes paid. So, if you entered your Canadian income there, it would show on form 1116 in part 1, line 1.

[Treetops10]

What has that got to do with CPP or OAS?

[ThomasM125]

You asked if the gross income on form 1116 would include Canadian CCP or OAS income. It would only if you entered the CCP or OAS income as foreign income in the foreign tax credit section of TurboTax.

[Lucchese]

Gross income is amount of CPP and/or OAS paid prior to any taxes withheld by Canada.  There should not be any if you are a resident in the USA

Although if resident in USA it would be entered on line for American Social Security.

If you are referring to Part 1 line item 3e; yes, it includes foreign income amount on line 3d

[MM137]

I have what I think is the same question as Treetops10. The issue is not about how to get CPP included in gross income. The question is whether CPP can be treated as foreign income. If so, then that could greatly increase the foreign tax credit.

[Treetops10]

I found the answer to my question regarding Canadian social benefits ie CPP, OAS. Here are IRS instructions for line 1a of form 1116:

"Lines 1a and 1b—Foreign Gross Income

Include income in the category checked above Part I that is taxable by the United States and is from sources within the country entered on line 1. You must include income even if it isn't taxable by that foreign country. "

This surely applies to CPP and OAS.

Also, note that line 3e includes the full amount of CPP and OAS from line 6a of form 1040 not the taxable amount of line 6b. Therefore it makes sense that the gross foreign income on form 1116 line 1a should also include CPP and OAS when figuring the ratio on line 3 f. 

As the Turbotax step-by-step instructions say in "Other Gross Income", enter "any other gross income received from sources in Canada".

This is where to enter  CPP and OAS plus other income. The total entered here will show up on 1116 line 1a. In the step-by-step process, I usually just total all these up and enter the total on one line with an abbreviated description as there are not enough boxes to enter all my items. I put the details in attached notes

[MM137]

Thanks so much TreeTops10! That seems clear and definitive. I had been looking through various IRS documents, but I never thought to look at the instructions for the form since I was relying on the tax software for that. And I had been confused by the claim that CPP and OAS are treated as if they were Social Security.

[DaveF1006]

Just for clarification purposes, CPP and OAS payments are only taxable in the US for US tax residents that receive OAS or CPP payments.  This is a provision within the US/Canada tax treaty.

You would include this income as gross income however when you complete the Foreign Tax Credit section in your return in accordance with IRS regulations.  This is found in its instructions for filling out Form 1116.

OAS and CPP payments are treated as social security payments for US income tax purposes.

Entering My CPP or OAS

@MM137 

[Edited 02/13/24|5:45 pm PST]

[MM137]

"you can't claim a foreign tax credit for income not taxed in Canada" But as pointed out be TreeTops10, the instructions for Form 1116 say "Include income in the category checked above Part I that is taxable by the United States and is from sources within the country entered on line 1. You must include income even if it isn't taxable by that foreign country." You can find that here: https://www.irs.gov/instructions/i1116#en_US_2023_publink11441fd0e4093

[DaveF1006]

Yes. You are correct according to Form 1116 instructions.  I will make the change in my original post to correct my original answer.