Canadian on TN1 in USA, tax advice needed

klanfa · Post by **klanfa** » Tue Mar 13, 2012 6:45 pm

Hi all,

For the past couple of years my tax situation became complicated enough to ask for the help of professionals. Before that I used to rely on tips from friends, common knowledge etc. Since I moved to US on a TN1, experienced sources have dried up and am hoping people in a very similar tax situation may be able to chip in with their wisdom. I'm looking for general guidance, do's and do not's, ways to stretch my tax dollars as far as they will go :-)

Situation:

Moved from Canada to US (South California) on TN1 work permit August 1st 2011. US income $35,000 for 2011, on W-2. Canadian income for 2011 is under $2,500, RRSP withdrawal / closure after August 1st 2011.
Two condos owned and family occupied in Canada (parents and brother's family). No income generated, but costs (mortgage interest, condo maintenance, insurance etc.) incurred.
Since departing Canada living in rented US residency, no immediate family members left in Canada (wife with me, no kids)

Questions:

- Should US reported income include Canada based income (RRSP withdrawal)?
- Should Canada reported income include US based income (W-2)?
- Can costs related to both properties in Canada be claimed as deductibles on US tax return?
- Can same costs be claimed only from Aug 4th 2011 or for the entire 2011?
- How does above change if Canadian exit tax return is filed (becoming non-resident on August 4th 2011)?
- Would the physical presence (work / live in USA ever since Aug 1st 2011) be sufficient to claim non-resident tax status in Canada? I still have bank accounts, credit cards (dormant), mortgages, pay utilities for condos, medical plan, etc.

Let me know if more info is required to clarify anything.

Thanks

nelsona · Post by **nelsona** » Tue Mar 13, 2012 9:38 pm

The first thing is to realize that you left canada on Aug 1.

From this you need to filer a departure return for canada, following the emigrants guide from CRA.

For US, depending on how many days you were in US in 2011, you can file either a 1040NR, a dual status return, or a full year 1040. This will determine what is reported on your Cdn return.

Come back after reading the Emigrants gude, and browsing this site. There is nothing particularly unusual about your situation.

Your medical plan is dead.

Your RRSP MUST have had eaclty 25% withheld or you have a problem.
Your rental income in canafa MUST have withholding applied every month. If you are not renting them out, none of the expense can be claimed.

klanfa · Post by **klanfa** » Wed Mar 14, 2012 12:48 pm

I was in US full time from Aug 1 2011 through Dec 31 2011 on TN; however I was also here as a visitor for about 3 months in 2011 (combined several visits) prior to Aug 2011. Does that count and does that make it possible to file full year 1040?

If I file full year 1040, I should be able to deduct :
- Jan 1 2011 to Aug 1 2011 : Both condos mortgage interest and real estate costs (one as my main home and the other as second home)
- Aug 1 2011 to Dec 31 2011 : One condo mortgage interest (as second home, my US rental place being the main home for that period)

I found several online sources claiming residence location (US based vs foreign) doesn't affect ability to deduct this. Also I've found in http://www.irs.gov/pub/irs-pdf/p936.pdf that I don't have to use the second home during the year at all to make this deduction.

Now if I go ahead and deduct this, can you see any downside to it?

Thanks

nelsona · Post by **nelsona** » Wed Mar 14, 2012 2:42 pm

It is ALWAYS possible to file full year, the fact that you were in US so much makes filing a 1040NR unlikrly, and make filing dual status impractical, since much of your Cdn income would need to be reported anyways. So full year will be your likely situation.

In US you can only deduct mortgage costs on both homes, not real estate costs since you did not rent out either.

klanfa · Post by **klanfa** » Fri Mar 16, 2012 12:05 pm

I'm sorry, I meant property taxes, not real estate costs. Can I deduct mortgage interest + property tax?

nelsona · Post by **nelsona** » Fri Mar 16, 2012 2:09 pm

teedup · Post by **teedup** » Mon Mar 19, 2012 2:26 am

Please confirm you are saying that as a TN1 using resident alien in California filing a 1040 return one can use the US IRS mortgage interest deduction on property owned in Canada that is being paid for with a Canadian mortgage.

Thanks

nelsona · Post by **nelsona** » Mon Mar 19, 2012 6:41 am

How does "yes" get confusing?

klanfa · Post by **klanfa** » Tue Mar 20, 2012 12:12 am

I found several independent claims online (forums, tax advisors etc.) saying that physical location of property doesn't matter, it can be in US or any other country. So, yes, it shouldn't be confusing :-)

Thanks Nelsona!

nelsona · Post by **nelsona** » Tue Mar 20, 2012 9:10 am

Huh? It would only be confusing if someone had said that it HAD TO BE IN US. No one saisd that, and I said you could claim.

I think it is time to close up shop until May 1st.