"tb" <nos...[at]example.com> wrote:

- quote -

You are entitled to file form 1116 but you may wish to look
at Form 2555 as well.

As for Social Security, you may wish to look at the other
treaties, namely Social Security Treaties. While I do not
know Swiss Treaties, the Canada-US Treaty allows Social
Security to be taxed only in the country of residence and
not in the country paying. You will need to find it there is
a similar clause applying to you and it isn't in the tax
treaty.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

Thanks, Chris, for pointing out the provisions of the
savings clause. Please allow me to ask a couple of follow-up
questions.

Let's assume the scenario that at retirement, my income
level will be such that I must file a U.S. income tax return
and pay taxes. Let's furthermore assume that I must also
file a Swiss income tax return and pay taxes on the same
sources of income.

Do you know if I am entitled to filing Form 1116 (Foreign
Tax Credit) with my 1040 and get credit for whatever taxes I
pay to the Swiss tax authorities?

If this is not possible --and purely from the standpoint of
U.S. income tax laws-- is there a way to legally mitigate
double taxation for a person in my situation?

I am also trying to decipher Article 23.1.(d) of the
Convention: The way I interpret it, Switzerland must allow
me to deduct whatever taxes I pay to the USA (with regards
to Social Security only) and grant an income deduction of
1/3 of the net Social Security payments. Is my
interpretation correct?

Thanks.

--
tb

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

"tb" <nos...[at]example.com> wrote:

- quote -

No. You overlooked an important section of any tax treaty,
the "savings clause". This is located in Article 1,
Paragraph 2 of the US- Switzerland treaty. Under the
savings clause, the US can tax its citizens as if the treaty
were not in effect, except for the particular items listed
in Article 1, paragraph 3. Since you are a US citizen, you
are still subject to US tax on your social security income
(as a US citizen, you are generally subject to US tax on
your worldwide income, including the social security
income). As a US citizen, however, you might find that a
large part of your social security income is not taxable--it
depends on your income levels.

- quote -

If you were not a US citizen, but were collecting social
security while living in Switzerland, you would file a
W-8BEN form with the Social Secutity Administration
indicating that you are eligible for a reduced withholding
tax (the withholding tax for social security benefits payed
to noncitizens is normally 30%). If there were a provision
in the treaty that you were eligible to take advantage of,
you would disclose that on Form 8833, which you would attach
to your tax return.

--Chris

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

I have dual US/Swiss citizenship. I am planning on retiring
in Switzerland and I will be eligible for U.S. Social
Security benefits.

Article 19.4 (Government Service and Social Security) of the
Convention Between the United States of America and the
Swiss Confederation For the Avoidance of Double Taxation
With Respect to Taxes On Income (effective Jan. 1, 1998)
reads:

4. Notwithstanding paragraph 2, social security
payments and other public pensions paid by a
Contracting State to an individual who is a
resident of the other Contracting State may be
taxed in that other State. However, such payments
may also be taxed in the first Contracting State
according to the laws of that State, but the tax
so charged shall not exceed 15 percent of the
gross amount of the payment.

I interpret this to mean that both Switzerland and the US
will be able to tax me on my U.S. Social Security benefits,
and that the U.S. cannot apply a tax rate greater than 15%
to such benefits.

Questions:

a) Is my interpretation correct?

b) If so, how do I apply the benefit of the 15% ceiling on
my U.S. income tax return? (Form 1040) As far as I can
tell, there is no worksheet in the 1040 instructions booklet
that addresses this issue when computing the tax on Line 44
of the income tax return.

Thanks.

--
tb

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >