US State Tax (based purely on residency) and Canada FTC

[MSS1976]

Let's say I work in NJ and commute to work from NY (and am considered a NY state resident for tax purposes). Let's say I am also considered a Canada/Alberta resident for tax purposes based on factual ties and the treaty tie-breaker rules. When I file my NY state taxes, I take a credit for taxes that have been paid to NJ. As NY state rates are slightly higher than NJ rates, I will still owe NY some income tax.

When I calculate the FTC for my Canadian taxes, can I include both the NJ state tax and (excess) tax from NY as foreign taxes? The income in actually "sourced" in NJ. The NY tax is based purely on the fact NY considers me a tax resident (and US states, like NY, are not bound by the US-Canada tax treaty--so there is no relief using the tie-breaker provisions of the treaty).

The CRA says one cannot include taxes that occur solely because one is a citizen of a country. However, the general guide says nothing about taxes that are solely based on a US state's definition of tax residency (that may be different from one's residency for US federal tax purposes -- as in this example).

[nelsona]

You can claim them. They are legit taxes covered by the treaty. The exclusion that limits FTC would not apply here.

[nelsona]

We've probably discussed this before, but living and working in US the amount of time you are talking about probably makes you deemed non-resident of Canada, regardless of ties in Canada, and FTC becomes moot.


But I'll leave that there.

[nelsona]

Never mind. Already addressed.

On your initial point. Even if NY and NJ were p[art of the treaty, nothing in the treaty would prevent NJ (because you work there as an employee), and NY (because you live there) from levying tax on that NJ income.

That would be the same as one living in ON and working in MI. They all get a bite of the apple, and the treaty doesn't prevent it.

[MSS1976]

Yes, you took the view my having a spouse in Canada and my frequent trips back to Canada make my "Centre of Vital Interests" Canada.

After reading some of the prior threats, I'm feeling a little uneasy. I'm a resident of Canada by virtue of my factual ties and the tie-breaker rules. However, from my employer's perspective, I'm a US/NY resident (as that is where I have a permanent address and spend most time). My employer doesn't know, and wouldn't be expected to know, anything about my ties to Canada. Am I creating some type of risk for my employer (as they are technically hiring a Canadian resident). I'm thinking about all those posts re: payroll requirements. *All worked is performed in US. Tell me I'm overthinking this.

[nelsona]

No. As I said, you are working like a Windsor-Detroit commuter. There is nothing the tte employer need do taxwise, any differently than they would with other local employees, since yo uare perfomingh work in the US as an employee.