The taxation of payments received from Canadian retirement programs that are similar to the U.S. Social Security system receive special tax treatment due to an income tax treaty between the United States and Canadian governments.
The special tax treatment applies to payments receive from the following Canadian retirement programs: Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS).
The way this income is taxed depends on the recipient’s residence.
If the recipient is a U.S. citizen or lawful permanent resident (green card holder) who is a resident of Canada, the benefits are taxable only in Canada.
If the recipient is a resident of the United States, the benefits:
are taxable only in the United States,
are treated as U.S. Social Security benefits for U.S. tax purposes, and
are reported on Form 1040, U.S. Individual Income Tax Return (or Form 1040A) on the line on which U.S. Social Security benefits would be reported.