# What percent of a Canadian defined benefit pension is taxable?



## mchjlh (Jun 6, 2013)

My wife and I have been preparing our own Canadian and US tax returns for years. It never seems straightforward, and we wish we had an accountant in the family to help us with the occasional questions. It seems that in retirement the questions have become more numerous. We have several questions this year as we complete the task. Maybe some folks here can assist. I'll post the issues as separate items to keep the comments, should there be any, more clearly focused. I spent several hours reading the forum, and did not (yet) find these items addressed.

To wit: Do we report 100% of our defined benefit public service pension income as taxable? During our working years, the portion of our salaries that we contributed to those pensions was reported to the US as taxable income, and thus was already subject to tax, though we never owed US tax any of those years. Since retiring, we’ve regularly included 100% of our defined benefit pension income in the number we enter on form 1040 in line 16a, but this year we wondered if that is correct.


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## Bevdeforges (Nov 16, 2007)

You should check the US-Canada tax treaty to be sure, but generally speaking defined benefit pension plans are taxed based on the benefits you are drawing, but which country gets the taxes is usually defined in the tax treaties. (And it can vary based on whether the employer was public or private.)

Again, in very general terms, for someone living abroad, if the pension is taxable by the state that is paying the pension, they generally pay it to you net of taxes - and then you report the pension on your US returns and claim the foreign tax credit for whatever tax was withheld. If the tax treaty specifies that you pay taxes on pensions to your country of residence (which I'm assuming is the US), then you may have 0 taxes withheld by Canada and the whole amount paid out is taxable in the US.

But you should check the tax treaty to be sure.
Cheers,
Bev


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