Form 1116 and "High Taxed Income" Category

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Stevecanada
Posts: 24
Joined: Sun Mar 30, 2014 4:21 pm
Location: Canada

Form 1116 and "High Taxed Income" Category

Post by Stevecanada »

I am trying to fill out Form 1116 for the first time. I live in Canada, but I am a dual US - Canadian citizen. I have wages and a few thousand dollars of interest income (both from Canadian sources). What I am trying to figure out is whether the interest income fits within the "Passive Category" on form 1116, or whether it should be moved to the general category. In other words, is interest income in Canada ever taxed at a higher rate then the highest rate that can be imposed in the US?
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

No, interst income is passive.

The highest US yax bracket is 39.6%.

Your effective Cdn taxrate would have to be 40% for it to be considered "high-taxed". That is effective (avearge rate) rate, not marginal rate.

So no cap gains would ever hit this rate, and you would have to be earning, and unless you are making close to 7-figures and living in the maritimes, your effective rate will never hit 40%.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Stevecanada
Posts: 24
Joined: Sun Mar 30, 2014 4:21 pm
Location: Canada

Post by Stevecanada »

Thanks Nelsona - much appreciated!
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