Is OAS from Canada taxable in the US? If so where is it entered?

[itonewbie · Accepted solution]

Protocol 4 modified paragraph 5 of XVIII under Protocol 3 and reversed the taxing right to the country of residence.  It also modified how social security benefits paid by the source country would be taxed in the country of residence.  See excerpt below with emphasis added.

Provided your client was a nonresident of Canada and a resident of the US, Canadian social security benefits would only be taxable in the US as if it were US social security, unless that benefit is normally tax exempt in Canada if paid to a Canadian tax resident.

If your client had Canadian taxes withheld as a nonresident, he/she may not have submitted the necessary paperwork to the Canadian payor to claim treaty exemption.  A refund claim will need to be made in Canada based on the treaty article and no foreign tax credit would be available on the US return for refundable foreign tax.

5. Benefits under the social security legislation in a Contracting State (including tier I railroad retirement benefits but not including unemployment benefits) paid to a resident of the other Contracting State shall be taxable only in that other State, subject to the following conditions:

(a) a benefit under the social security legislation in the United States paid to a resident of Canada shall be taxable in Canada as though it were a benefit under the Canada Pension Plan, except that 15 per cent of the amount of the benefit shall be exempt from Canadian tax; and

(b) a benefit under the social security legislation in Canada paid to a resident of the United States shall be taxable in the United States as though it were a benefit under the Social Security Act, except that a type of benefit that is not subject to Canadian tax when paid to residents of Canada shall be exempt from United States tax.

[Edit: Updated for Protocol 4]

[Young-TP]

Thank you. Everything I read says it's included with the social security benefits on the 1040. I'm just confused, no surprise. Can you direct me to something I can print out for the client saying it's not taxable in the U.S.? Appreciate your help.

[itonewbie]

@Young TP I only just noticed that there is a Protocol 4 that superseded the Protocol 3 that I cited. Please see the updated response above.

[Young-TP]

Thank you

[itonewbie]

NP.

[TaxPrep99]

I am confused on the amount that should be entered as social security benefits on the 1040. US taxpayer receives $6,000 Canadian pension.  Would $6,000 be included as social security benefits on the 1040 or only 85% of the $6,000 or $5,100?

[Young-TP]

for the old age security from Canada I added it to the amount they had received from social security on the SS worksheet. That way it carries to the front page with the correct %.