Whether your Canada Pension Plan (CPP)/Old Age Security (OAS) benefit from Canada is taxable in the USA depends on which country you reside in.
If you are a resident of the USA, then your benefits are only taxable in the USA. The IRS treats CPP/OAS as the equivalent of US social security benefits for tax purposes, which means the income is reported on your 1040 and are taxed at the 85% inclusion rate. Moreover, because of provisions in the USA-Canada tax treaty, your CPP/OAS income is not taxable in Canada and is totally free from CRA non-resident withholding.
If, on the other hand, you are a US citizen or green card holder who is a resident of Canada, then your benefits are taxable only in Canada. Nevertheless, you still need to report these benefits on your US return. In addition, it’s recommended that you file a Form 8833 treaty exemption with your US return to exempt the income from US taxation.
At Gedeon Law & CPA, when it comes to the taxation of your CPP/OAS on both sides of the border, we are here to help you properly report the income on your returns and avoid double taxation on the income.
