Are my US Social Security Benefits subject to US income taxation?
Maybe. Your social security benefits will be subject to US income taxation if your “provisional income” is above certain thresholds. Provisional income for a calendar year equals the sum of your adjusted gross income, tax exempt interest, and half of your social security benefits. For individuals with provisional income equal to or more than $25,000 and for married persons filing jointly with provisional income equal to or more than $32,000, will be subject to US income taxation on his or her social security benefits. The rules for taxing social security benefits will apply the same to US citizens residing in the US and abroad.
How much of my Social Security Benefits are subject to US income taxation?
Individuals with provisional income between $25,000 and $34,000 and married persons filing jointly with provisional income between $34,000 and $44,000 will include an amount not to exceed fifty percent of his or her social security benefits as income. Individuals with provisional income above $34,000 and married persons filing jointly with provisional income above $44,000 will include an amount not to exceed eighty-five percent of his or her social security benefits as income.
Will a US income tax treaty reduce the US taxation of my Social Security Benefits while I reside abroad?
Under the US Model Income Tax Treaty, US citizens living abroad are not eligible for treaty benefits with certain exceptions. One of the exceptions is for social security benefits. However, the provision in the US Model Income Tax Treaty provides that the US is the only country that can tax US social security benefits.
Are US citizens subject to Social Security and Medicare taxes on his or her wages while working outside of the US?
Yes, unless the US has entered into a “Totalization Agreements” with the country where you are working. The purpose of the Totalization Agreements is avoiding double taxation of income with respect to social security and Medicare taxes.
As a US Citizen working abroad, can I choose which country’s mandatory Social Security or similar mandatory system I participate?
No. The Totalization Agreements will provide the mandatory system the employee is required to participate.