I receive a pension from the Netherlands. How does this affect my tax return? | NetherlandsWorldwide (2024)

FAQs

I receive a pension from the Netherlands. How does this affect my tax return? | NetherlandsWorldwide? ›

If you live abroad and receive a pension from the Netherlands, you usually have to pay Dutch tax on it. To file a Dutch tax return, you will need annual income statement(s) from your pension provider(s). Your particular situation will determine in which country or countries you are required to pay tax.

Foreign pensions are generally subject to income tax in the US by the IRS. The rules for taxing a foreign pension will vary depending on several factors, including income tax treaties.

Taxes on Pension Income

You may owe federal income tax at your regular rate as you receive the money from pension annuities and periodic pension payments. But if you take a direct lump-sum payout from your pension instead, you must pay the total tax due when you file your return for the year you receive the money.

If you receive more than €20,000 a year in pension, annuity and social insurance payments from the Netherlands, in most cases your pension will be taxed in the Netherlands. If you worked for the Dutch government, you will normally pay tax in the Netherlands on the pension you built up during that time.

Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income.

Particularly it must be reported on 1040 Federal Tax Return line 8 under “ other income” indicating clearly that it's a “ Foreign Pension from xxx”. In xxx write the country. If you want you can attach an addendum with your foreign payor tax identification, if any. All payor have a tax identification in their country.

The US Netherlands tax treaty, originally signed in 1993, serves as an agreement between the two countries for determining the taxation of income where both nations may have the legal right to tax according to their respective laws.

Form 1099-R is used to report the distribution of retirement benefits such as pensions and annuities. You should receive a copy of Form 1099-R, or some variation, if you received a distribution of $10 or more from your retirement plan.

Generally, pension and annuity payments are subject to Federal income tax withholding.

Your pension will be reported on a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Form 1099-R will show you how much you contributed to the plan and how much tax was withheld.

What is the average Dutch pension? ›

The Dutch state pension is funded by worker contributions, at a rate of 17.9% of salary. Single pensioners entitled to the full state pension can receive a gross total of €1,270.67 in 2020 (70% of the net minimum wage), while married or cohabiting couples can receive €870.03 for (50% of net minimum wage).

It is possible to receive the state / AOW pension if you move out of the Netherlands. Whether you receive it, and how much, depends on several factors, mostly how long you have lived in the country and at what point you leave.

If your total box 3 income is less than €50,650 (or €101,300 combined with your fiscal partner), there's no tax to pay.

Can you collect Social Security and a pension at the same time? You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages.

Monthly Benefits

Retirees' monthly retirement benefit payments are treated as ordinary income.

Generally speaking, the US benefit is reduced by $50 for every $100 of the foreign pension.

Everyone living or working in the Netherlands is automatically insured under the Old Age Pensions Act (AOW). This insurance stops when you go to live or work outside the Netherlands. Your state pension (AOW) will stop accruing. As a result, you will receive a lower state pension (AOW) when you reach retirement age.

If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable unless the payment is a qualified distribution from a designated Roth account.

However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023). In addition, you can exclude or deduct certain foreign housing amounts.

If you reside in a foreign country and receive a pension/annuity paid by a U.S. payor, you may claim an exemption from withholding of U.S. Federal Income Tax (FIT) under a tax treaty by completing Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, and ...