# UK Private Pension Treatment by IRS



## pmb (Nov 9, 2013)

Hello Everyone, 
This is my first post!
I am a dual UK/USA citizen, living and retired in the US. I am taxed in the US, having taken advantage of relief from being taxed twice (double taxation).
I have UK based private pension plans, (e.g. some with Standard Life), and if I were in UK, could draw 25% of the pot tax free. 
Can anyone tell me whether that allowance is honored by the IRS, or whether the whole pot will now be liable for taxation?
Thanks.


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## Bevdeforges (Nov 16, 2007)

Have moved you over to the tax section just to see if we can flag down a few more responses.

Generally speaking the US doesn't honor any "tax free" aspects of any private pension plan. You would have to declare the income and then claim the Foreign Tax Credit for taxes paid on the pension. (Pensions being considered "unearned income".) For those sorts of income considered tax-free at the source, there's no double taxation to be avoided, so you just wind up having to pay the tax.
Cheers,
Bev


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## JustLurking (Mar 25, 2015)

pmb said:


> Can anyone tell me whether that allowance is honored by the IRS, or whether the whole pot will now be liable for taxation?


This is discussed almost endlessly on assorted expat finance sites. If you try a couple of Google searches you'll be able to unearth any number of relevant discussions. The current bottom line appears to be that _nobody knows for certain_.

There is language in the US/UK tax treaty that protects some types and portions of pension withdrawals from tax, but as usual the US has inserted its trademark execrable 'saving clause' to disallow most of it for US citizens and residents. What remains after this is open to interpretation. Interpreting it has exercised many minds, without any apparent resolution.

Sorry that this is so vague. Things really shouldn't be this way.


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