What is the saving clause in a tax treaty and how does it limit my benefits?
Almost every U.S. tax treaty contains a saving clause, which lets the United States tax its citizens and residents as if the treaty did not exist, preserving the U.S. right to tax worldwide income. In practice this means many treaty benefits you might expect are clawed back once you are a U.S. resident or citizen. The treaty then lists specific exceptions to the saving clause, such as certain pension, student, or social security provisions, that still apply to you. So before assuming a treaty article saves you tax, check whether the saving clause overrides it and whether your article is one of the carved-out exceptions. This is why treaty planning is subtle and why generic advice like 'the treaty prevents double tax' is often too optimistic for residents. Read the treaty's saving-clause paragraph carefully.
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