- Technical Explanation - https://www.treasury.gov/resource-cente ... eus-uk.pdf
- EU Citizen working and living in UK (pre-Brexit), and started contributing to a UK pension plan (having contributed to this before moving to the US is important as it relates to the treaty).
- Moved to US under a UK contract and kept contributing to the UK pension via paycheck deductions. For US tax filing purposes, reduced US income by the amount contributed to the UK pension by having a negative entry for “Other Income” on Form 1040.
- Obtained green card, continued contributions to the UK pension and offsetting end of year taxes by a negative entry for “Other Income” on Form 1040.
- Became a US citizen, contributions continued, offsetting income when filing taxes continued as in prior years.
The Technical Explanation adds:contributions paid by or on behalf of that individual to the pension scheme during the period that he exercises an employment or self-employment in the other State shall be deductible (or excludable) in computing his taxable income in that other State [Article 18, Paragraph 2a]
Other relevant points:It is irrelevant for purposes of paragraph 2 whether the participant establishes residence in the State where the individual renders services (the “host State”). The benefits provided in paragraph 2 are similar to the benefits the U.S. Model provides with respect to contributions.
• Amount contributed has always been around $5,000 to $7,000 USD (under US/UK limits)
• The US W-2 does not appear to deduct the pension contributions from Box 1 (Wages).
The specific questions are:
- Is the approach of simply reducing income as a qualified UK pension contribution on the Other Income section of the 1040 appropriate?
- Does residential status (resident, permanent resident (green card), citizen) matter in any of this?
In my specific scenario, it was a move from the UK to the US, and then later obtaining US citizenship. But maybe the important aspect is this the plan originated in the UK and the contributions just continued?Thanks to the U.S./U.K. tax treaty, U.S. citizens with U.K. pensions can deduct contributions from income to their U.K. pension just like they could for an American 401(k) or similar retirement vehicles. However, you must reside within the U.K. to get this preferential treatment—the minute you move back to the U.S. you’re taxed on your U.K. pension contributions just like you would be for any other nonqualified plan.
Any further info or guidance is much appreciated.