Is it always helpful to file a 1116 for USC's in Canada?

CdnAmerican · Post by **CdnAmerican** » Sun Apr 06, 2014 7:33 pm

I am a USC in Canada. My income is below the threshold for US taxes, as my working income is accounted for with the 2555, and my passive income is more than offset by the standard deduction.

As such, is there any value in filing the 1116? Will this help offset taxes in future years?

rlb · Post by **rlb** » Sun Apr 06, 2014 9:13 pm

Your passive income is Canadian? If that is the case, I would file form 1116 to generate a foreign tax credit carryover for possible use in future years. To use it, you will need to have non-zero US tax in some future year. It is quite possible you never will be able to use it, but it is not much of an effort on your part now to file that form.

CdnAmerican · Post by **CdnAmerican** » Sun Apr 06, 2014 10:31 pm

Thanks rlb! I should have clarified my situation a bit more. The problem is that my passive income is all RESP appreciation which counts as income for US purposes but not for Cdn purposes. As such, I'm thinking I won't have any Cdn tax owed on it, so I won't have anything to carry forward. Under those circumstances, is it still useful to do the 1116?

MGeorge · Post by **MGeorge** » Mon Apr 07, 2014 9:57 am

Hi CdnAmerican,

Filing 1116 probably wouldn't do much good. However, if you are already sitting on foreign tax credit carryovers from previous years, you might want to file 1116 just to keep them clearly documented for future use.

It sound like you don't have any passive FTCs to claim.
General limit types would be work income (which you can't claim since you got rid of them with 2555). Other general limit FTCs could be RRSP withdrawals and pension income. If you have none of these, I wouldn't bother with 1116.

CdnAmerican · Post by **CdnAmerican** » Wed Apr 09, 2014 8:25 am

Thanks MGeorge - yep, that's where I'm at, with no other general income (almost all accounted for by 2555, but with the remainder accounted for by the exemptions and Sched A), and all my passive income not taxable in Canada because it's RESP "income". I have never filed it so I'll probably let it go this year too.

nelsona · Post by **nelsona** » Wed Apr 09, 2014 9:01 am

So no bank interest, no non-sheletered investments? One thing is your house. If it gains more than $250K ($500K if married) then the overage is taxable in US. It would be good to have ftc banked for whan you sell it.

nelsona · Post by **nelsona** » Wed Apr 09, 2014 9:02 am

If you have kids, you probably are not qualifying for child tax credit if you use 2555. Not relly the issue you asked about, but always good to consider.

CdnAmerican · Post by **CdnAmerican** » Wed Apr 09, 2014 9:04 pm

Thanks nelsona - yep, that's accurate. We don't qualify for the CTC anymore, but that's a good point for others (or us if we lose a job!).