Moving to Japan - Tax Question

[dselner]

My wife and I are both U.S. citizens. We both receive monthly United States Social Security Benefit payments. I am retired from service with the U. S. government, and receive monthly annuity (U.S. Public Pension) payments based on my service in the U.S.

We are planning to move to Japan (my wife is a former Japanese national, and her mother still resides in Japan). While living in Japan, will our Social Security and government pension payments be considered taxable income by Japan, or will I continue to pay income tax to the United States?

Any information will be greatly appreciated.

[larabell]

Originally Posted by dselner

While living in Japan, will our Social Security and government pension payments be considered taxable income by Japan, or will I continue to pay income tax to the United States?

Possibly both... but you should be asking a tax specialist rather than a web forum.

The US taxes their citizens regardless of where they live. So, in theory, if your benefits were taxable when you were living in the US, they're still taxable by the US even while you're living here. If you don't make over... what is it now?... $70k?, you might fall under the foreign income exclusion. And, of course, you should get a US tax credit for any tax you pay to Japan on income that exceeds the exclusion.

As for Japan... since the income is, technically, not Japan-source income (ie: you didn't do any work in Japan for which this is remuneration) it might only be taxable to the extent that you remit the money into the country. That may be moot in your case, since you're likely planning to live off that income while you're here. But it might be useful for tax purposes to have it deposited in a bank in the US and only bring over what you need. Whatever you leave in the US will likely escape Japanese taxation.

Taxes for American ex-pats living overseas are difficult enough as it is -- your situation throws in a couple new wrinkles. You really should be talking to an expert.

[Bevdeforges]

OK, as larabell says, as US citizens, you are both subject to US taxes for the rest of your lives, no matter where you live in the world. And chances are, you'll wind up paying tax to the US on your social security and government pension - however the details of this depend on the tax treaties between the US and Japan.

One small correction to what larabell said, however. You are not eligible for the overseas earned income exclusion for your pensions. The exclusion applies only to earned income - i.e. salary earned while resident overseas.

Chances are you'll also have to declare your pensions to the Japanese tax authorities, but to the extent that you pay taxes to the US, you'll have some mechanism for crediting those payments against whatever your Japanese tax liability would have been.

Can't help you with the Japanese side of things, but for the US taxes you can download Publication 54 from the IRS website. There is also a publication that explains taxation of social security benefits in great benefit that might be of interest to you.

When you get to Japan, you can get tax help through the US Embassy. Chances are there is an IRS office in the Embassy. You can also contact one of the US expat groups in Japan and they should be able to offer some assistance, and possibly even suggest a US tax advisor (usually one of the members).
Cheers,
Bev

[mosha09]

The $75K exclusion is actually $85K now. Thanks