Calculating Foreign Tax Credit

[Mswalleye2]

When calculating how much tax to claim on US husbands Canadian return for FTC ..

Can I run the tax program with his pensions and interest ... get the tax owing

Then rerun the program without the interest ... the difference being what the taxes owed are on that income?

Would this work if he stays within the same tax bracket for both scenarios?

...........

If not .. I see where you complete both forms to the point of taxes owed ... then ...1. the computation of taxes is based on a percentage of the interest versus overall income and 2. somewhere else I seen that you are to use the marginal tax rate.

Which is it?

Also, the tax programs have you enter the info from the 1099s to calculate the FTC but .. what if what is input exceeds the taxes ACTUALLY paid. Do you just change one of the 1099 figures ... enter a bogus 1099 with a negative dollar figure?

tks

[nelsona]

No, you prepare the entire tax return without FTC, and then with FTC. Not with some income and without others.
The FTC calculations in either country NEVER use marginal rate.ALWAYS effective.
The 11116 calculations will determine the limit of your fTC. You do not have to bogus anything. You will simply have taxes left over.

other than that I'm not sure what you mean by your last statement. the withholding on the 1099 is not what is used on the Cdn FTC calculation, what is used is what is calculated on the 1040. The withholding entry of the 1099 is for the 1040 purposes, it has no bearing on your CDn return.

[Mswalleye2]

Thanks, effective tax makes sense. I take it I can use that method both sides of border?

Turbo tax (for T1) told me to enter the tax withheld showing on the 1099 into the program and that I didn't have to compute FTC, the program does it. I realize that is not right. I was not sure if there was a special way to enter info that conflicts with 1099 ... when actual tax paid and taxes withheld are not the same. So, I will figure out effective tax for each US pension and then just enter the actual taxes paid in the appropriate box on the tax program .. not taxes withheld?

[nelsona]

Correct. If you were not filing a 1040 or 1040NR, the 1099 method would be ok. but you are not doing this, so you need to report the calculated tax.
Remember that info you get from turbotax telephlunkies is about as accurate as from CRA telephlunkies.