U.S. citizen, grad student in Canada --Canadian tax status?

Cangrad · Post by **Cangrad** » Thu Feb 23, 2012 11:04 pm

I am a U.S. citizen who began PhD studies at the end of Aug. 2011 at a Canadian university, supported by a fellowship and stipend. Having spent approx. 125 days in Canada in 2011, I am really confused about whether Canada considers me a non-resident or a resident for taxation purposes, and whether or not I need to file Canadian federal and provincial tax returns for 2011.

Since Aug., I have rented a furnished room in an apartment in Canada, and in addition to my studies, have participated in both campus and local activities. While I do have a Canadian bank account and credit card, I also still have active U.S. accounts. I have a Canadian street parking permit, but the car I drive belongs to my parents who reside in the U.S. The health insurance that covers me in Canada is a special Graduate Student plan provided by my university. I have no family in Canada; all of my family ties, my driver's and voter's registration, and more than half my belongings are still in the U.S. So....would Canada consider me a non-resident or a resident for 2011 tax purposes? Would I need to file Canadian tax returns to account for my graduate fellowship or stipend?

Thank you very much for your help!

nelsona · Post by **nelsona** » Fri Feb 24, 2012 9:04 am

Residency is a secondary issue here.

Much depends who is paying you. If you are being paid by a Cdn university, then you obviously need to file in canada, whether or not you are considered resident.

If not, then whether or not you or considered resident, the income may be exempt from Cdn tax, by treaty.

Cangrad · Post by **Cangrad** » Fri Feb 24, 2012 11:44 am

Thank you, nelsona.

Your response has led me to do further research and reconsider the questions I should ask. The income I received was from a Canadian university, in support of my PhD studies, and was fellowship income, not income from employment. The amount was reported to me on a T4A form in Box 105. Is this income considered taxable in Canada? Must I file a Canadian tax return to document this amount? If I must file a Canadian tax return, then, considering my personal circumstances ( as noted previously), would Canada consider me a non-resident or resident for 2011 tax purposes?

Thanks, in advance, for your help.

nelsona · Post by **nelsona** » Fri Feb 24, 2012 1:31 pm

http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... l-eng.html

As I said, the income you are recieving is Cdn-sourced, thus subject to both US and Cdn taxation.

Cangrad · Post by **Cangrad** » Fri Feb 24, 2012 6:05 pm

Thank you, nelsona, for the link you sent me and your attempt to answer my re-phrased questions. I read that link as well as all the information I could find on the CRA webpages, much of it written in legalese, pertaining to fellowship income and amounts reported on T4A forms in Box 105, and I am still mightily confused. In an attempt to understand what I had read, I also consulted information presented on pg. 348 and pg. 349 of "Canada's Economic Action Plan, Year 2, Budget 2010" http://www.cbc.ca/news/budget2010/BudgetPlan2010.pdf., in the section entitled, "Scholarship Exemption and Education Tax Credit." The material in this document, as I read it, appears to state that fellowship amounts received in pursuit of a doctoral degree are to be considered non-taxable.

Could you please tell me whether I have interpreted the above-referenced document correctly? Are PhD fellowship amounts received by full-time students considered non-taxable in Canada? If so, since I received no other Canadian income, is it necessary for me to file a Canadian tax return simply to document the fellowship amount which was reported to me on a T4A form in Box 105?

Thank you again for your help.

JGCA · Post by **JGCA** » Fri Feb 24, 2012 8:24 pm

When a Canadian source of income is said to be non taxable it does not necessarily mean it is not reported as part of total income then deducted as to arrive to taxable income. In the case of a Phd fellowship amount it will not be taxable if you are eligible to claim the full educational amount on your return, if you can not claim this then only enter the portion that does not qualify on line 130 in excess of $500. So in a nutshell you must file a return to demonstrate that the amount qualifies for teh exemption under the full time educational amount or if not only amounts over $500.

Under recent amendments not yet passed even if you do not qualify for the full educational amount you can claim as an exemption the amount equal to the part time educational amount being the cost of tuition fees plus related materials.

nelsona · Post by **nelsona** » Sat Feb 25, 2012 1:24 am

I purposely did not anwer your residency question, as I felt it better for you to answer to your own situation.

Unlike Cdn students in US, who simply cannot become US tax residents, neither by IRS rules, nor by treaty, US students in canada do become resident (deemed residents) by sheer number of days present per year, certainly after their second semester.

Cdn-source income is reportable in Canada and US for you. Whether it is non-taxable in canada or not doesn't help you much, as it will be taxable in US. Any tax you saved in canada would reduce your tax credit in US.

The real place to look for whether your income is taxable or not is in the general tax guide, and the guide for students (which expalins all manner of tax breaks for students), not a government policy statement. besides, an onlne tax prep like ufile.ca will ask you these questions and determine your taxability, usually for free.

But, in general, unlike US, cdn taxpayers are not obligated to file a tax return unless they actually OWE more tax at year end than has been withheld, or have incurred certain specific events in the year, which you can find on the "Do I need to file" section of most tax guides.

JGCA · Post by **JGCA** » Sat Feb 25, 2012 11:31 am

this is very true, but to determine if your fellowship is really non taxable in Canada based on the educational amount exemption I would recommed that you file a CND tax return to demostrate your eligibility for exemption since its based on a qualification to be exempted.

Cangrad · Post by **Cangrad** » Sat Feb 25, 2012 1:02 pm

Thank you nelsona and JGCA for your responses. You have both been very helpful in providing answers to some of my questions and in suggesting approaches to finding answers to the others.

Despite reading both the general tax guide and the student tax guide and trying to see how my personal circumstances might apply, I am still unsure of my Canadian tax-residency status for 2011. I guess I will try to phone the CRA for further guidance on the matter.

I probably will also now attempt to contact the CRA for guidance regarding the taxability/ non-taxability of my fellowship. If I do need to file a Canadian tax return for 2011, I must accurately complete one soon in order to have the financial information I need to correctly complete and file my U.S. taxes by deadline.

Thanks again.

nelsona · Post by **nelsona** » Sat Feb 25, 2012 1:07 pm

Youi can always file a resident return. In your case, it just might be simpler.

You do have to file a Cdn return because you have Cdn income, so why are you so concernred if it is a residnt return or not. Non-resident returns are complex, and your income level is not worth the hassle. Just assume you are resident from the day you arrived, and file accordingly. Your provincial tax will proabaly be less than your non-resident surtax.

JGCA · Post by **JGCA** » Sat Feb 25, 2012 1:52 pm

Nelson is right file the simplest possible way, trust me when I tell you that when you phone CRA or evn IRS you will always get a different answer evertime you speak to an agent, you may end up getting more confused than you ever were, file the regular return.