Dual citizen, live in Canada, travel to US for work

wandersean · Post by **wandersean** » Sat Mar 28, 2015 4:41 pm

Hi, I'm fairly new to this, so please let me know if I'm omitting important information here.

<ul>
<li>I'm a dual citizen of Canada and the US</li>
<li>I live in Canada</li>
<li>I work for a Canadian company with T4 income and Canadian tax is withheld</li>
<li>I often travel the US for business (in 2014, was in the US for two thirds of my work days)</li>
<li>I receive dividend and interest income in both the US and Canada, but in 2014 did not receive any employment income in the US</li>
</ul>

The Canadian side of my situation seems fairly straightforward, but I'm very likely missing something there. The US side has me a bit confused. My understanding is that the US considers the 2/3 of my employment income for which I performed work in the US as US-source income. My question is whether I can still apply the foreign tax credit for taxes paid in Canada to nearly eliminate my US taxes due?

I'd appreciate any insight into my situation, and am happy to provide more information if it's needed.

nelsona · Post by **nelsona** » Sat Mar 28, 2015 9:42 pm

No, you can only use 1116 on 1/3 of your income; you will pay US tax.

wandersean · Post by **wandersean** » Sun Mar 29, 2015 11:37 am

Nelsona, thank you for the quick reply. So I use 1116 on 1/3 of the income, paying US tax on the rest. Can I take a Canadian credit for this or am I simply going to be subject to double taxation on 2/3 of the income?

nelsona · Post by **nelsona** » Sun Mar 29, 2015 1:04 pm

The US tax you pay on your US source income will be a credit on your Cdn return.

wandersean · Post by **wandersean** » Sun Apr 12, 2015 12:30 pm

Thanks again Nelsona. I just realized that I was in the US less than 183 days (started my job mid-year) so I think the treaty applies here?

Do I use 1116 Re-source to move it all to Canadian source and thus get credit for all tax on employment income?

nelsona · Post by **nelsona** » Mon Apr 13, 2015 10:01 am

It will depend on the days you spent in 2015. The taxability under that portion of the treaty is applied retroactively. Since for the period between mid-2014 and mid-2105 you have no doubt exceeded the 183 days, you are taxable in US for the entire period (and are taxable in the state).

So you cannot use the re-sourcing provision, since you fail to meet the XV.2(b).

It shouldn't be a big deal to you. the tax you pay in US will be credited on your Cdn return. If it isn't last year, taht ais because of the split-year, and should work out better for 2015 when it wil all be taxable in US.