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Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: US Tax
Satisfied Customers: 265
Experience:  Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant.
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Im a dual resident with us/uk. I receive a pension from my

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I'm a dual resident with us/uk. I receive a pension from my employer in the US which is deposited into my US bank account and I pay state and Federal tax on that income. I intend to live in the UK. Do I have to continue to pay US taxes on that income or could I choose pay UK tax and ask for a credit from the US?

Thanks,

Julie

Shane-CPA :

Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your tax question.

Shane-CPA :

Because you are a resident of of the U.S., you are required to pay U.S. tax on your world-wide income.

Shane-CPA :

However, there is a foreign tax credit allowed for in the U.S. tax code that allows you to reduce any U.S. tax by foreign taxes paid in another country. Therefore, you will not get stuck paying double-tax on income earned throughout the year.

Shane-CPA :

For example, if you pay UK taxes on the U.S. pension income, you can reduce the U.S. taxes by the amount of taxes paid to the UK.

Shane-CPA :

I hope this helps to answer your question. If you would like for me to expand on any item above, please let me know. In order for me to receive credit for my response, I must receive positive feedback from you. Therefore, if you are not completely satisfied, please let me know and I will be happy to assist you further. Thank you for using Just Answer and I hope you have a great day!

Customer: Hi Shane,
Customer: Does the same apply to California is state tax?
Shane-CPA :

Hi...let me check on California state tax laws...one moment please...

Customer: Thank-you
Shane-CPA :

I apologize for the hold....California does not allow for a foreign tax credit but if you are able to itemize your U.S. deductions on your U.S. federal tax return, you would be able to deduct the California state taxes against the U.S. taxes paid.

Customer: No worries. Umm...could you explain a bit more?
Shane-CPA :

Sure...normally when you file a U.S. tax return you will get either a standard deduction or itemized deduction (whichever is higher). For example, in 2013, the standard deduction for a single taxpayer is $6,100 (double that for married taxpayers filing joint). However, if you have real estate taxes, mortgage interest, charitable contributions, HIGH medical expenses and various other miscellaneous expenses which add up to a total higher than the standard deductions listed above, you could add the California state taxes paid to the list of itemized tax deductions to offset your U.S. taxable income.

Customer: Ok, great thank-you I get it now. You answered this question for me.
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