Navigating Cross-Border Retirement Benefits in 2025: US Social Security and Canadian CPP/OAS

Retirement planning can be complex under the best of circumstances. However, if you live in one country but receive (or expect to receive) Social Security or pension benefits from another country, the complexity grows exponentially. In 2025, many of the fundamentals still echo the longstanding agreements made years ago between the United States and Canada—but several details and contexts have shifted, and it’s important to understand the current environment. Whether you’re a US citizen living in Canada, or a Canadian citizen residing in the US, you may find yourself asking: Are my cross-border Social Security or pension benefits taxable, and if so, where?

The good news is that the US and Canada have a longstanding “totalization agreement” and a strong tax treaty network that helps mitigate double taxation, sets residency and taxation rules, and smooths out many (though not all) of the wrinkles associated with cross-border retirement benefits. This article is intended to provide an up-to-date overview of where these issues stand in 2025, what you need to consider, and how you can effectively and strategically plan.

1. Historical Background: The Totalization Agreement (1984 to 2025)

Since 1984, the United States and Canada have operated under a totalization agreement designed to coordinate the two countries’ respective Social Security programs. This agreement helps individuals who have divided their working years between the two nations. Instead of leaving workers at risk of not meeting eligibility requirements in either country, the totalization agreement allows them to combine or “totalize” coverage periods.

Why Does This Matter in 2025?

• Longer Working Lives and Multiple Moves: Compared to 2014, more people in 2025 have lived and worked in multiple countries. Technology, remote work, and a globalized economy have made it more common to spend part of one’s career in the US and part in Canada.
• Continued Coordination: The totalization agreement remains in force, with occasional administrative updates from both US and Canadian authorities. Though no major overhauls of the treaty have occurred since the early 2000s, incremental changes in the respective countries’ laws have continually shaped how it is administered.

For those unfamiliar with the basics: the US Social Security program requires a minimum of 40 quarters (10 years) of covered work to qualify for retirement benefits. Canada’s public pension system, which includes the Canada Pension Plan (CPP) and Old Age Security (OAS), follows its own rules for eligibility, based on residency and contribution history. The totalization agreement allows credits in one country to be recognized by the other, preventing you from falling short of eligibility if your work history straddles the border.

Note: Quebec has its own pension plan and is covered by a separate agreement with the United States. However, the core principles are very similar.

2. Are Cross-Border Social Security Benefits Taxable?

One of the biggest concerns for retirees is how, exactly, their cross-border benefits will be taxed. It’s easy to become confused by talk of “double taxation” or “tax exempt” status. Fortunately, the US-Canada Income Tax Treaty and the totalization agreement work together to prevent double taxation, or at least mitigate it. In most cases, you will pay taxes on your benefit in one country, not both.

Key Considerations for 2025

• Dual Citizens: If you’re both a US and Canadian citizen, you need to be mindful of the fact that the US levies taxes based on citizenship. However, if you live in Canada the tax treaty and totalization agreement often step in to limit or eliminate your US tax liability on Social Security benefits.
• Tax Filing and Reporting: Even if you aren’t taxed by both countries on the same income, you may need to report income to both the Canada Revenue Agency (CRA) and the Internal Revenue Service (IRS). Ensuring you comply with foreign reporting requirements is essential to avoid penalties.

3. US Social Security Benefits for Americans Living in Canada

Let’s look at a practical example. Suppose you’re a US citizen who worked in the United States for six years and then moved to Canada for the last 30 years of your career. You continue to live in Canada after retirement, and in 2025 you want to claim your US Social Security benefits.

In this example, you do not meet the minimum years of service south of the border to qualify for U.S Social Security. However, thanks to the Canada-U.S. Totalization Agreement, you are allowed to leverage your Canada Pension Plan credits to bridge the 4-year deficit gap to meet U.S. Social Security qualifications. Even though you now qualify, your Social Security benefit will be based upon your six-year earnings record vs. the ten-year minimum requirement. Had the “Agreement” not been assembled, you would not have been able to receive any Social Security benefit.

The key question then becomes: Where do you pay tax on those benefits, if at all?

Taxation Under the 2025 Rules

• Taxable Only in Canada: According to the US-Canada Income Tax Treaty, if you receive US Social Security benefits while living in Canada, those benefits are taxed exclusively by Canada.
• Canadian Taxation Rate: As of 2025, Canada generally includes 85% of your US Social Security benefits in your taxable income, with the remaining 15% exempt. This calculation has remained relatively consistent since changes were made in the 1990s.
• Your Overall Canadian Tax Bill: The amount of actual tax you pay on that 85% depends on your total income and other deductions or credits you might have available in Canada.
• US Reporting: If you’re a US citizen, you still need to report worldwide income to the IRS annually (using Form 1040). However, under the treaty, you generally won’t owe US tax on these benefits. You may need to file additional forms (such as a Form 8833 Treaty-Based Return Position Disclosure) if you’re excluding the Social Security benefits from your US taxable income based on the treaty.

Case Study: Retiring in Canada with US Social Security Income

To illustrate, consider a fictional retiree, Robert, who spent 25 years working in the US before relocating to Canada for the last 10 years. In 2014, Robert was preparing to retire so in 2025 let’s assume he’s well into his retirement and receiving US Social Security benefits.

• He Lives in Canada: Under the treaty, the US Social Security Administration still sends his payments, but Canada taxes them at the 85% inclusion rate.
• He Files a Canadian Tax Return: Robert includes 85% of the benefits (converted to Canadian dollars) in his taxable income.
• He Files a US Tax Return: He reports the benefits, but typically owes no additional US tax because the treaty grants exclusive taxing rights to Canada.

What’s the bottom line? Robert is unlikely to face an onerous tax burden just because he lives in Canada. He still needs to comply with filing obligations on both sides of the border, but double taxation should not occur.

4. CPP/OAS Benefits for Canadians Living in the US

Now let’s flip the example: You’re a Canadian citizen who spent much of your working life in Canada, but you’re living in the United States as a resident (or dual citizen). You’re receiving or planning to receive Canada Pension Plan (CPP) and Old Age Security (OAS) payments. What is the tax treatment in 2025?

Taxation Under the 2025 Rules

• Taxable Only in the US: Under the tax treaty, your CPP/OAS payments are generally taxable solely in the US, but only if you live in the US.
• Treated Like US Social Security: From the IRS perspective, CPP and OAS are seen as equivalent to Social Security for tax purposes.
• 85% Inclusion Rate: You typically report 85% of your CPP/OAS on your US tax return (Form 1040). The specific amount included in your taxable income may vary based on your other income, filing status, and tax bracket. The 85% figure is the maximum inclusion rate, which means up to 85% of your Canadian benefits can be taxed in the US.
• No Canadian Withholding: Since your benefits are taxed exclusively by the United States, Canada does not usually withhold tax on these payments and you generally won’t owe Canadian taxes on your CPP/OAS since you live south of the border.

Case Study: Taxing Canadian Retirement Income as a US Resident

Sarah is a Canadian citizen who moved to the United States in 2020 to work for a US tech company. She retired in 2025 after reaching the current OAS eligibility age (currently 65, though there has been political discussion about gradually raising this age in the future). She also has considerable CPP contributions from her two decades of work in Canada.

• Taxation: Sarah receives both CPP and OAS benefits. Since she is living as a US resident, those Canadian benefits are treated for tax reporting purposes as if they were US Social Security.
• Reporting: Sarah reports them on her Form 1040. Depending on her income levels, up to 85% of her CPP/OAS may be included in her taxable income.
• Canada: The CRA typically does not tax her retirement benefits because the treaty designates the US as having the sole right to tax them, given her current residency status.

5. Avoiding Double Taxation

The driving principle behind the US-Canada treaty is that you shouldn’t have to pay tax twice on the same income. Here are some additional tips and insights for 2025:

1. Claiming Treaty Benefits: If you are a US citizen living in Canada or a Canadian living in the US, you’ll need to reference the tax treaty in your tax return. In the US, this often involves attaching a form (such as the previously mentioned Form 8833) if you’re taking a treaty-based position that reduces your US taxable income.
2. Foreign Tax Credits: In certain circumstances, if one country taxes your income first, you might be able to claim a foreign tax credit in the other country. This is common for other types of income (like dividends, capital gains, or employment income). But with Social Security or CPP/OAS, the treaty often designates exclusive taxing authority, so you don’t typically apply for credits on that income.
3. Residency Determination: With remote work becoming more prevalent, residency determination can be tricky. Each country has tests (such as the Substantial Presence Test in the US and residency rules in Canada). Your formal residency status is crucial to understanding which country can tax your benefits. If you split your time between countries, consult a cross-border tax professional for guidance on where you’re officially considered a resident.

6. Changes and Developments Since 2014

When our original blog post on this topic was written in 2014, many of the fundamentals regarding tax treatment were similar to what they are today. However, a few key developments have taken place between then and 2025:

1. Increased Cost of Living Adjustments (COLA): US Social Security benefits experienced a series of higher-than-average cost-of-living adjustments between 2022 and 2025 due to global economic fluctuations and inflationary pressures. This means that retirees in 2025 may see a higher nominal dollar amount of Social Security benefits than might have been expected a decade ago.
2. Shifting Demographics: The “baby boomer” generation largely retired by 2025, leading to an increase in the number of cross-border retirees seeking professional financial advice. Reflecting that growing need, there’s a more robust infrastructure of financial advisors who specialize in cross-border issues.
3. E-Filing and Compliance: Both the CRA and the IRS have increasingly promoted e-filing systems and cross-border data-sharing agreements. While the original totalization and tax treaties remain in place, enforcement of reporting requirements has become more sophisticated. Expect to file electronically in many cases and to have your information cross-checked for consistency between the two governments.
4. WEP & GPO Awareness: Up until January 5, 2025,  individuals  who received U.S. Social Security and a pension benefit from a non-covered employment such as the Canadian Pension Plan (CPP) may have faced the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO) which reduced their Social Security payments. This reduction has been eliminated. However, after the Social Security Fairness Act was signed into law earlier this year, individuals who receive both U.S. Social Security and CPP benefits will no longer have their Social Security benefits reduced by the WEP.

7. Additional Considerations for 2025 Retirees

7.1 Healthcare Coordination

Although healthcare is beyond the strict scope of taxation, it is a crucial part of cross-border retirement planning. In Canada, coverage under the provincial health insurance plan typically depends on residency status. If you are a Canadian resident, you may have access to provincial healthcare even if you receive US Social Security. Conversely, if you are a retiree living in the US, you may rely on Medicare (eligibility at age 65), but you’ll need to be mindful of how many years you’ve lived in the US and your overall tax payment history. That’s because Medicare Part A is typically premium-free if you or your spouse paid Medicare taxes for a certain length of time.

7.2 Estate and Gift Tax Issues

Cross-border retirees should also pay attention to estate and gift tax rules. The US levies estate taxes based on citizenship and worldwide assets, whereas Canada has no estate tax (but does have a deemed disposition of assets at death, which can trigger capital gains). The US-Canada tax treaty can help alleviate some of these issues, but the rules differ substantially from how Social Security and CPP/OAS are taxed.

7.3 State Taxes in the US

If you retire in a state that has an income tax—such as California, New York, or Oregon—you’ll need to see how state tax law interacts with your foreign benefits. In many states, Canada Pension Plan or Old Age Security benefits might be taxed similarly to Social Security benefits, but each state can have its own specific rules. Make sure you consult a tax professional familiar with your state.

7.4 Provincial Taxes in Canada

Similarly, in Canada, each province has its own tax rates that stack on top of the federal rate. If you live in a higher-tax province, your overall tax rate could be significant, even if only 85% of your US Social Security is included in your Canadian taxable income. Some provinces (like Quebec) also have their own pension plans that coordinate with the US totalization agreement.

8. Planning Strategies for Cross-Border Retirees

Whether you’re about to retire or are already receiving Social Security (or CPP/OAS) benefits in 2025, there are proactive steps to ensure you maximize your income and minimize your tax burden.

1. Consult a Cross-Border Financial Advisor: This might seem obvious, but given the complexities, having someone who understands both US and Canadian tax and retirement systems is invaluable.
2. Optimize Timing of Benefit Claims: If you’re eligible for both CPP and US Social Security, consider the best time to draw each benefit. For US Social Security, you can claim as early as age 62 (though full retirement age is now between 66 and 67 for many retirees, and discussions for raising it further have circulated). Canada’s CPP can be taken as early as age 60, but with reduced benefits. OAS is typically claimable at age 65, but deferral increases the benefit. Weigh the cross-border tax implications carefully.
3. Track Tax Residency: If you plan to move back and forth frequently, maintain clear records. If you exceed the 183-day limit in one country, you could inadvertently become a tax resident there.
4. Plan for Currency Exchange: The Canadian dollar and US dollar exchange rate can significantly affect your purchasing power. If the CAD/USD exchange rate shifts, your net income from cross-border benefits could see sudden changes. Some retirees maintain bank accounts in both currencies and plan their conversions strategically to take advantage of favorable rates.
5. File Timely and Accurate Returns: Watch out for deadlines in both countries. In the US, expatriates often get automatic extensions, but you may need to file certain forms by specific deadlines to avoid penalties.

9. Frequently Asked Questions in 2025

9.1 “I’m a US citizen living in Canada. Do I have to file a US tax return?”

Yes, the US requires that all its citizens, no matter where they live, file an annual tax return. However, your US Social Security income may be excluded from US taxation under the tax treaty if you’re a resident of Canada—but you still have to report it.

9.2 “I’m a Canadian citizen living in the US Do I file taxes in Canada?”

Generally no, not unless you’re considered a resident of Canada or have Canadian-source income (beyond CPP/OAS). As a non-resident receiving CPP/OAS, you are taxed in the US only on those benefits.

9.3 “How does the totalization agreement impact my eligibility?”

It can help you meet the minimum required quarters (in the US) or contribution period (in Canada) if you otherwise don’t qualify. You won’t necessarily get a higher benefit, but you may become eligible for a benefit you’d otherwise miss.

9.4 “What about partial years of residency or short-term work?”

The agreement can still help by counting partial credits from each country, but consult a cross-border financial professional. In 2025, the rules for short-term, remote, or contract work are more nuanced than ever, especially with the rise of global gig platforms.

Conclusion

Cross-border retirement planning between the United States and Canada in 2025 remains a multifaceted challenge, but one that’s governed by well-established rules and agreements designed to prevent double taxation and ensure retirees receive the benefits they’ve earned. The core principles of the US-Canada Income Tax Treaty and the 1984 totalization agreement have stood the test of time—although they’ve been incrementally updated to adapt to new realities.