Best tax strategy for spouse in Canada/US
Moderator: Mark T Serbinski CA CPA
Best tax strategy for spouse in Canada/US
My situation is as follows I am a resident alien in US since March 2005, while my spouse lived/worked in Canada until she moved to US in Dec 2005. I am unclear as to the best strategy for US taxes (Canadian situation is pretty straightforward: we both have to file "normal" individual returns with me declaring world income and claiming tax credit for US taxes)
I would not say that you should file a 'norma' Cdn return. You should be filing an exit return with a departure date in December 2005. that is when your wife left canada.
Otherwise, you are saying that neither of you left until Jan 2006, which is not true.
For Us, the standard prcactice is for you to fiel a joint, full-year 1040, and use 2555 to exempt your Cdn wages before you entered US (March) and her Cdn wages before she entered (December). This will yeild the lowest US tax.
You would then use the prorated tax on the US-sourced income your reeport on your Cdn return, as the tax credit on your Cdn return.
EG: you made US$100,000 in 2005, $20,000 in canada, $75,000 between march and Decemnber and $5,000 in latter part of decemeber. Youre wife made US$30,000 in canada, and that is it.
You file a joint return in US, for $130,000, exclude $50,000 on 2555 ($20 for you 30 for her). end up with, say $30,000 in taxes (fed, state, FICA).
Your Cdn returns would show $95,000 for you (you would not report that last $5000). your foreign income would be $75,000 and your eligible US tax would be (75/80) * $30,000. your wife would claim no foreign taxes.
Otherwise, you are saying that neither of you left until Jan 2006, which is not true.
For Us, the standard prcactice is for you to fiel a joint, full-year 1040, and use 2555 to exempt your Cdn wages before you entered US (March) and her Cdn wages before she entered (December). This will yeild the lowest US tax.
You would then use the prorated tax on the US-sourced income your reeport on your Cdn return, as the tax credit on your Cdn return.
EG: you made US$100,000 in 2005, $20,000 in canada, $75,000 between march and Decemnber and $5,000 in latter part of decemeber. Youre wife made US$30,000 in canada, and that is it.
You file a joint return in US, for $130,000, exclude $50,000 on 2555 ($20 for you 30 for her). end up with, say $30,000 in taxes (fed, state, FICA).
Your Cdn returns would show $95,000 for you (you would not report that last $5000). your foreign income would be $75,000 and your eligible US tax would be (75/80) * $30,000. your wife would claim no foreign taxes.
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
Turbo Tax error or wrong line in 1040
I tried to follow tha advice using turbotax by declaring my spouse's income (100% foreign salary) as foreign salary/wage income not on W2 and then claiming the 2555 exemption for it but it ended up showing a double exemption??? so maybe I entered her CDN income in the wrong place?