SUMMARY

The purpose of this enactment is to reduce the inclusion rate on United States social security payments received by Canadian taxpayers from 85% to 50%.

The ``inclusion rate'' is the percentage of United States social security payments that is to be included as income by a Canadian taxpayer. The Canada-United States Tax Convention Act, 1984 provides for 15% of such payments to be non-taxable in the hands of Canadian residents, which would result in an 85% inclusion rate.

This enactment provides that a further 35% of United States Social Security payments are not included in taxable income. This 35% is in addition to the 15% that is to be exempt from Canadian tax under the Convention and the enactment therefore increases the exemption to 50% and decreases the inclusion rate to 50%.