Blog post

QUESTION

Hi Phil,

I’m planning to retire in the next few years, and my wife and I have decided to move from Arizona to Victoria, BC, to be closer to our grandkids. One thing I haven’t figured out yet is how my U.S. Social Security benefits will work once I’m living in Canada.

I’ve been paying into Social Security my entire life, and I want to make sure I can access my benefits without any issues. A few things I’m unsure about:

– Will I still receive my full Social Security payments in Canada?
– Do I need to pay Canadian tax on my Social Security income?
– How does the U.S.-Canada tax treaty impact my benefits?
– Should I have my payments sent to a U.S. or Canadian bank account?

I want to make sure I set this up correctly before the move. Your blog has been an amazing resource—thank you for all the great information you share!

Best regards,
XXXXX

ANSWER

Hi XXXXXXX

Thanks for reaching out, and I’m glad you’ve found the blog helpful!

To answer your questions about U.S. Social Security in Canada, here’s what you need to know:

1. You’ll still receive your full Social Security payments in Canada.

The good news is that moving to Canada doesn’t affect your eligibility to receive U.S. Social Security benefits. The Social Security Administration (SSA) continues payments to retirees living in Canada without any reduction, assuming you qualify based on your U.S. work history.

There was previously a rule that reduced Social Security benefits for individuals receiving Canada Pension Plan (CPP) benefits due to the Windfall Elimination Provision (WEP), but that rule has changed. If you’re also entitled to CPP, it won’t impact the amount you receive from Social Security anymore. You can read more about this change here:
Goodbye to the Windfall Elimination Provision – What Americans in Canada Need to Know.

2. Your Social Security will only be taxable in Canada.

A key benefit of the U.S.-Canada Tax Treaty is that it prevents double taxation of Social Security benefits. Under the treaty, Social Security is only taxable in the country where you reside.

Once you become a tax resident of Canada, you’ll report your Social Security income only on your Canadian tax return. The IRS will not tax it, but you must file Form 8833 with your U.S. tax return to formally claim the treaty exemption. This ensures the IRS acknowledges that you’re only paying tax on these benefits in Canada.

In Canada, Social Security benefits are 85% taxable, meaning only 85% of the total amount is included in your taxable income. This is slightly more favorable than the U.S. tax treatment, where up to 85% of Social Security benefits can be taxable depending on your total income.

For a deeper dive into how the U.S.-Canada tax treaty applies to pensions, check out this article:
Tax Treaty Articles Every U.S. Expat Should Know – Pensions.

3. You can have your Social Security payments sent to a Canadian bank account.

Many retirees prefer to have their Social Security benefits deposited into a Canadian account to avoid currency conversion hassles and fees. The U.S. Social Security Administration (SSA) offers direct deposit to Canadian financial institutions, making it a seamless process.

You can choose to:

• Keep your U.S. bank account and receive your payments in USD, then transfer funds to Canada when needed (though this may involve currency exchange fees).
• Set up direct deposit to a Canadian bank account in CAD, which the SSA allows through its International Direct Deposit (IDD) program.

For more details on how to set up direct deposit in Canada, you can visit the SSA’s page on international payments:
SSA – International Direct Deposit.

Next Steps

Before you move, it’s worth reviewing your overall cross-border tax and financial situation to ensure everything is structured efficiently. There are other factors to consider, such as how your investments and retirement accounts will be taxed in Canada, estate planning differences, and strategies to minimize currency exchange costs.

If you’d like to go over everything in more detail and make sure you’re set up properly before the move, I’d be happy to help. Let me know if you’d like to set up a time to chat. You can book a time to chat with our team here: www.beaconhillwm.ca/meet 

Looking forward to welcoming you to Victoria!

Cheers

Phil