# Taxation of UK pensions by US (and France)



## J4paws (Nov 8, 2015)

A hopeful request for some clarification and/or best case scenario before I submit our US tax return with the worst case scenario of everything taxable!

I am a UK National (born in UK and worked for many years in UK). I then moved to US, met my husband and became a US citizen (Naturalised). We are now retired and live full time in France.

My UK pensions - both State pension (like US Social Security pension) and other work related pensions are taxable in France rather than UK (UK - France tax treaty)
I have been trying to establish the exact situation with regard to my UK pensions as to whether they are fully, partly, or not at all taxable in the US.
After reading all 3 tax treaties: U.K./US , UK/France, US/France and researching as much as possible on the Internet Where I have found some very differing views and most relating to people resident in either UK or US the "waters look very murky" indeed and the situation is not totally clear. E.g. Does US / UK tax treaty have precedence over the others even though I am not a resident in either country, but a US citizen?

After trying to read all the exceptions, contradictions, etc of the tax treaties I fear I should perhaps consider the full gross amount of all my UK pensions as fully taxable 
(Even if some is not taxable - too complicated to work out), which unfortunately means we have some tax to pay this year instead of zero tax. 

Can anyone offer some clarification please?


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## Bevdeforges (Nov 16, 2007)

To be real honest about it, if you're confused after reading all the relevant treaties, I think it's safe to assume that the IRS is at least as confused as you are. 

Generally speaking, it's the UK that gets first crack at taxing US governmental pensions (i.e. those paid through the government). Private pensions are a whole different issue. If you're getting any US Social Security payments in there, those are only taxable by the IRS (though declarable on your French declaration - but see the instructions for form 2047 on details about how to declare those so they won't be taxed in France).

Either you simply don't declare your "foreign" pensions to the IRS - or you declare them, but claim them as "not taxable". Or you claim the Foreign Tax Credit for taxes you pay to France (or the UK) on your foreign pensions. Depending on the source of your pensions (public or private), you should probably just take a stance one way or the other, file your returns that way - and if they get back to you, you can always change things and pay up. But depending on the amounts involved, there's a reasonable chance they'll never bother.
Cheers,
Bev


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## JustLurking (Mar 25, 2015)

J4paws said:


> Does US / UK tax treaty have precedence over the others even though I am not a resident in either country, but a US citizen?


I think the answer may be that it won't help you even if it does.

Looking at this US/UK treaty flowchart for pensions, your UK state and private pensions are both taxable to the US because you are (unfortunate enough to be) a US citizen. In both cases the US negates the benefits for you by using the spiteful treaty 'saving clause' to disregard the parts of the treaty that you could use otherwise. You do get to claim a credit against French tax paid on these pensions, but from the sound of things this might not wipe out any US liability entirely.

Aside from the above though, I really have no idea how tax treaties work when more than two countries are involved. Sorry I cannot be more helpful.

Have you considered renouncing your US citizenship? From what you write it appears that it might currently be nothing but a financial millstone. Just a thought.


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## Bevdeforges (Nov 16, 2007)

Just be advised that renouncing costs a whopping $2350, whereas a good faith attempt to declare but minimize the "damage" may simply get filed and registered, without any follow-up. It depends on the amounts involved, but there is no evidence that overseas residents' tax forms are being particularly strictly controlled, given all the other constraints on the IRS' time and budgets these days.
Cheers,
Bev


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## J4paws (Nov 8, 2015)

Many thanks for your helpful replies.

We do not want to renounce US citizenship.

Bev, I was thinking along the same lines as you until I started researching and got into all the confusing and contradictory details. So ..... I may just go back to that - declare in good faith while trying to minimise the damage.


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