10 Home-Country Pensions and Savings Accounts
Question for this chapter. If my household lives in the U.S. and holds a pension, public benefit or savings account in a home country like Mexico, China, India, Canada, the United Kingdom or Colombia, which country taxes the payments and what must I report to the U.S.?
Answer. Who may tax a payment depends on the income tax treaty between the U.S. and the home country, and treaties usually treat private pensions and public pensions differently. Citizens and green card holders face an extra layer, because a treaty rule protects them only when it is listed as an exception to the saving clause. Reporting of foreign accounts is a separate matter from tax, so an account can need to be reported even when no tax is due.
What to check
- Whether the payment is a private pension or a social security or other public benefit, since the treaty rules differ for each.
- Which treaty applies, and whether one exists at all, because the IRS treaty list has no entry for Colombia.
- Whether you are a U.S. citizen or green card holder, and whether the relevant treaty rule survives the saving clause.
- Whether the payment is periodic or a lump sum, since some treaty definitions cover only periodic payments.
- Whether the account must be reported on the FBAR or Form 8938, which are separate from the tax return and have their own thresholds.
What to confirm. Confirm the pension article of your treaty, your own status under the saving clause, and which foreign account reports apply to each account you hold.
One-line summary. The treaty decides who taxes a home-country pension, but account reporting to the U.S. follows its own rules.
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