US Social Security Benefits Received in Canada: How Are They Taxed?

If you are a Canadian resident receiving US Social Security benefits, Canada has the exclusive right to tax them under Article XVIII(1) of the Canada-US tax treaty. The US does not tax the benefits (and should not withhold if you have established your non-resident status with the SSA). Canada includes 85% of the Social Security benefit in your income and allows a 15% deduction, so the effective inclusion is 85%.

This is the mirror of the CPP and OAS received in the US situation: the treaty gives exclusive taxing rights to the country of residence for social security benefits paid by the other country.

Treaty allocation

Article XVIII(1) provides: “Benefits paid under the social security legislation in a Contracting State… to a resident of the other Contracting State shall be taxable only in that other State.”

US Social Security is paid under US social security legislation. If you are a resident of Canada, the benefit is “taxable only in” Canada. The US has no taxing right.

This is a change from pre-1996 treaty rules. Before the 1995 protocol amendment (effective 1996), the US retained the right to tax 15% of Social Security benefits paid to Canadian residents. Under the current treaty, the allocation is exclusive to the country of residence.

How Canada taxes it

Line 11500 (other pensions and superannuation): report the full gross US Social Security benefit in Canadian dollars, converted at the exchange rate for each payment (or the annual average rate if payments are consistent throughout the year).

Line 25600 (additional deductions): claim the 15% deduction under ITA 110(1)(f)(i). This provision allows a deduction for the portion of foreign pension income that would have been exempt in the paying country. Since 15% of US Social Security benefits would be exempt from US tax at the highest inclusion level (IRC 86 caps inclusion at 85%), Canada mirrors this by allowing a 15% deduction.

Net inclusion: 85% of the US Social Security benefit is included in Canadian taxable income and taxed at your marginal Canadian rate.

Currency conversion: convert each payment from USD to CAD using the Bank of Canada exchange rate on the date of payment, or use the annual average rate if the SSA makes monthly payments throughout the year (CRA accepts either method consistently applied).

What about US withholding?

The SSA may withhold US tax on benefits paid to non-resident aliens. The default withholding rate is 30% under IRC 1441, but the treaty reduces this to 0% for Canadian residents (because the treaty gives exclusive taxing rights to Canada).

To establish your treaty position and stop US withholding:

1. File Form W-8BEN with the SSA (or the equivalent certification that the SSA accepts for treaty claims). This tells the SSA that you are a Canadian resident claiming treaty benefits.
2. If withholding has already occurred: file a US non-resident return (Form 1040-NR) reporting the Social Security income and claiming a refund of the withholding. Alternatively, claim the US withholding as a foreign tax credit on your Canadian return (ITA 126(1)), though the refund route is usually better because it recovers the full withholding rather than crediting it against Canadian tax.

In practice, the SSA’s handling of treaty claims for Canadian residents is well-established, and most Canadian residents receiving US Social Security do not have US tax withheld. If you are newly establishing non-resident status (e.g., you recently moved from the US to Canada), there may be a transition period where withholding continues until the SSA processes your treaty claim.

What about the totalization agreement?

The Canada-US Social Security Totalization Agreement allows workers to combine periods of coverage in both countries to meet the minimum eligibility requirements for benefits. If you worked in the US for 6 years and in Canada for 30 years, the totalization agreement lets you count the 6 US years toward US Social Security eligibility (which normally requires 40 quarters, or 10 years).

The totalization agreement affects eligibility, not taxation. Whether you qualified for US Social Security through your own US work history or through totalization, the tax treatment is the same: Article XVIII(1) gives Canada exclusive taxing rights on benefits paid to Canadian residents.

The totalization agreement guide covers the eligibility and benefit calculation mechanics in detail.

What if I also receive CPP?

Many cross-border retirees in Canada receive both US Social Security and CPP, and the claiming order and timing between the two benefits is its own decision. The tax treatment is different:

• CPP: taxable in Canada as Canadian pension income. Reported on the T4A(P) slip. No treaty issue, because CPP is a Canadian benefit paid to a Canadian resident, so Canada taxes it under domestic law.
• US Social Security: taxable in Canada under the treaty at 85% inclusion, as described above. Reported on line 11500 as foreign pension income with the 15% deduction on line 25600.

The combined income from both benefits, plus any RRIF/RRSP withdrawals and investment income, may push you into the OAS clawback zone. The OAS clawback threshold applies to Canadian residents (unlike US residents, who are exempt from the clawback under the treaty). If your combined income exceeds $90,997 (2025 threshold), your OAS benefits start to be clawed back.

What about the WEP repeal?

The Social Security Fairness Act of 2025 repealed the Windfall Elimination Provision (WEP), which had reduced Social Security benefits for workers who also received a foreign pension (including CPP). If your US Social Security benefit increased because of the WEP repeal, the higher benefit is taxed the same way: 85% included in Canadian income with the 15% deduction.

The retroactive lump-sum payments from the WEP repeal (covering January 2024 onward) are also taxable in Canada. CRA may allow you to allocate the lump sum to the years it relates to for tax purposes (similar to the IRC 86(e) lump-sum election in the US), but the CRA’s guidance on this specific situation is still developing. Include the full lump sum in income for the year received unless CRA guidance specifies otherwise.

What should I do next?

If you are receiving US Social Security in Canada, confirm that the SSA is not withholding US tax. Report the benefit on your Canadian return at 85% inclusion (line 11500 minus line 25600). If you also receive CPP and OAS, check whether your combined income pushes you into the OAS clawback zone.

• CPP and OAS received in the US: how are they taxed?, the reverse scenario
• The WEP repeal: do I get more money now?, if your benefit increased
• Canada-US totalization agreement, if you are using combined work credits
• Does the OAS clawback apply if I live in the US?, the other direction

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.