Hi all
I already know that we are (me and my wife) residents for tax purpose based on the previous thread i posted (), but at this point i am facing a dilemma on the foreign income , mostly from the house rental. Tried to find similar forum posts, but not too many canadians with home property left in canada (i know i should do something about it :) ) that are renting.
I have a I still have one question that i was able to find on the forum, but cannot find, hence it gives me a headache and perhaps others as well.
We fill the 1040 in US, what is the amount to declare the foreign income. Say, i make 10k of rental , out of which 25% goes to CRA. I also pay 2k property taxes.
Received : 10k
Tax paid : -2.5k (to cra)
property tax : -2k
Tax declaration in US : foreign tax = 10k - 2.5 - 2k = 5.5k.
Am i missing something?
US resident with foreign income
Moderator: Mark T Serbinski CA CPA
forgot to add the previous posted where nelsona was so helpful to clarify a lot in my head : http://forums.serbinski.com/viewtopic.php?t=9136
INCORRECT.
You need to report the whole Gross income before taxes to both CRA and IRS.
On your 216 return for CRA you will pay 25% on the net income. Gross minus expenses.
On 1040 you will pay US tax on the NET income (Report gross you have to show your expenses, and depreciation) , and use the Cdn tax as a credit.
The CRA website explaines ypur responsibilities for remitting your rent tax MONTHLY to CRA, and how to file 216 return,
You need to report the whole Gross income before taxes to both CRA and IRS.
On your 216 return for CRA you will pay 25% on the net income. Gross minus expenses.
On 1040 you will pay US tax on the NET income (Report gross you have to show your expenses, and depreciation) , and use the Cdn tax as a credit.
The CRA website explaines ypur responsibilities for remitting your rent tax MONTHLY to CRA, and how to file 216 return,
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Ohh, i guess got it ! In other words, in the example i gave it before,
Gross amount = 10.000
Expenses (insurance, property taxes, condo fees, etc .. http://www.cra-arc.gc.ca/E/pub/tg/t4036 ... #P4036_001) = 2.000
Net = 8.000
for CRA:
- report Gross (10.000) and expenses (2.000)
- fill 216 and pay 25% of 8.000 = 2.000
On US 1040:
- report the NET only , which is 8.000 (converted in USD)
- use the foreign income tax credit of 2.000 (which was the 25% that i gave cra) , also converted in usd.
Please feel free to correct me if i am wrong. I believe this is very helpful for all the canadian property owner's to calculate the amounts. Thanks nelsona.
Gross amount = 10.000
Expenses (insurance, property taxes, condo fees, etc .. http://www.cra-arc.gc.ca/E/pub/tg/t4036 ... #P4036_001) = 2.000
Net = 8.000
for CRA:
- report Gross (10.000) and expenses (2.000)
- fill 216 and pay 25% of 8.000 = 2.000
On US 1040:
- report the NET only , which is 8.000 (converted in USD)
- use the foreign income tax credit of 2.000 (which was the 25% that i gave cra) , also converted in usd.
Please feel free to correct me if i am wrong. I believe this is very helpful for all the canadian property owner's to calculate the amounts. Thanks nelsona.
No, on US you report GROSS rent $10K (there is a schedule for this) and deduct expenses according to US rules, which are not exactly like Canada. After you calculate the US tax, then you use form 1116 to determine how much of the Cdn tax you can reduce your US tax by.
And you should be sending your tax every month to CRA.
And you should be sending your tax every month to CRA.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best