Do you have to use the DTA?

So specifically, as a U.S/U.K citizen, U.K resident and only receiving U.K OAP, private pension and interest. U.S  SS, IRA and 401(k). To make life easier and to eliminate using the re-sourcing by treaty on the 1116. Can you just lump everything into the passive category. So pay HMRC tax on worldwide income, (U.S and U.K), take the amount paid and use as a credit for the exact same income on your 1040? (SS would be shown as fully taxable on 1040)

Sounds easy, but as U.K tax rates are higher, you'd still not owe anything to Uncle Sam and still get a carry forward.

I'm sure this has been floated around before and i'm missing something, do you have to take a treaty based return?

So specifically, as a U.S/U.K citizen, U.K resident and only receiving U.K OAP, private pension and interest. U.S  SS, IRA and 401(k). To make life easier and to eliminate using the re-sourcing by treaty on the 1116. Can you just lump everything into the passive category. So pay HMRC tax on worldwide income, (U.S and U.K), take the amount paid and use as a credit for the exact same income on your 1040? (SS would be shown as fully taxable on 1040)

Sounds easy, but as U.K tax rates are higher, you'd still not owe anything to Uncle Sam and still get a carry forward.

I'm sure this has been floated around before and i'm missing something, do you have to take a treaty based return?

I don’t think it is quite as simple as that since your US SS is taxable only  in the UK so you can’t  get a tax credit in the US for it. (The treaty says SS is not taxed in the US at all).

Thank you...

So would you only complete the 'Passive' category of the 1116, to include all the rest of the income in this example? As you can't take any credit for U.S. SS, there would be no need to file an 1116 re-sourced by treaty?

I guess you'll need to apportion the amount of U.K tax paid on U.S. SS and exclude on the 1040

HMRC = Worldwide income
IRS      = Worldwide income  minus SS income

Tax paid to HMRC minus the tax paid to HMRC for SS is then used on the 1116 to allow credit?

I can't swear by this, so you'll want to check with someone more knowledgeable, but I ~think~ you are correct. Since you are not being taxed in the USA on the SS, you can't use any tax credit for tax paid on the SS to HMRC against your other passive taxes due in the USA. You can only use credits when the same bit of income is taxed in both places. You get credit with one entity for tax paid to the other.

Someone with  more experience with this would be good to consult.   

(I sure would like to be wrong on this!)

Thank you...

So would you only complete the 'Passive' category of the 1116, to include all the rest of the income in this example? As you can't take any credit for U.S. SS, there would be no need to file an 1116 re-sourced by treaty?

I guess you'll need to apportion the amount of U.K tax paid on U.S. SS and exclude on the 1040

HMRC = Worldwide income
IRS      = Worldwide income  minus SS income

Tax paid to HMRC minus the tax paid to HMRC for SS is then used on the 1116 to allow credit?

I am not yet receiving SS so haven't got a past return to look at. I'm also not receiving any IRA or 401k distributions but am receiving US dividends and capital gains. My US income is "resourced by Treaty" on a 1116 for a foreign tax credit and my UK income, including UK pensions is marked as General Category on a 2nd 1116 for a foreign tax credit.

If you take regular contributions from your IRA then I think that will be taxed by HMRC so you will need to do Resourced by Treaty 1116 to reclaim the tax paid. If you take an IRA or 401k lump sum then it is only taxed in the USA.  I have done lump sum IRA to Roth conversions which were only taxed in the US. Future Roth withdrawals will be tax free in both countries.