Family Tax Credit on 1040NR?

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

sjantzi
Posts: 67
Joined: Wed Feb 20, 2013 11:44 am

Family Tax Credit on 1040NR?

Post by sjantzi »

I'm reading that the exemptions on 1040 have been replaced with a $500 tax credit per dependent. Do we know if this will also be on the 1040NR?
sjantzi
Posts: 67
Joined: Wed Feb 20, 2013 11:44 am

Post by sjantzi »

Just to be clear I'm referring to personal exemptions ($4050 per exemption)
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

From what I know, the exemptions are gone, and the child tax credit is doubling to $2000/child. What is being added is that for each child too OLD for the child tax credit (ie. 17 yrs old) and any aged folks they may support, the supporters can get $500 credit. It does not apply to a spouse.

As to whether this is on the new 1040NR? Were you able to collect the child tax credit, as a Cdn?. Then they should get the $500 if they have aged out.

This does highlight that if one may begin owing more tax on 1040NR than they can "use up" on their Cdn return, they may have to start filing 'normal' 1040's or XXV(2) 1040NR's
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
sjantzi
Posts: 67
Joined: Wed Feb 20, 2013 11:44 am

Post by sjantzi »

I never claimed child tax credit since it appeared I could not since my kids were Cdn and non-residents.

I did and do however claim them as dependents for personal exemptions
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

So, if they are 17 and over you might get the $500.

Looks like you will need to re-evaluate how you do your US taxes. or figure if it is worth taking any Cdn-only deductions like RRSPs.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
sjantzi
Posts: 67
Joined: Wed Feb 20, 2013 11:44 am

Post by sjantzi »

I have a spreadsheet that calculates my Cnd/US 1040/US 1040NR so I can easily play with the numbers and see what the best outcome is.

With the new tax changes its pretty much a wash, no real difference from 2017. If I do get the $500 credit per dependent that does increase my take home a bit which my RRSPs offset in Cdn.

One of the reasons I file 1040NR instead of 1040 is to avoid having to file FBAR, FATCA etc

Has anything changed with this? If I file 1040 would I still need report my accounts etc?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

If you filed XXV92), you don't have to FBAR, FATCA or anything. It is merely a calculation method using full 1040, not filing 1040.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
sjantzi
Posts: 67
Joined: Wed Feb 20, 2013 11:44 am

Post by sjantzi »

I've been filling 1040NR XXV(2)

If I were to file a normal 1040, I would have file FBAR etc correct? This has not changed?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

FBAR, FATCA, 3520 etc are really only supposed to be intended for US citizens and GC holders, not those who elect to file 1040, so you could probably get away without these if you filed 1040. But there is NEVER an advantage to filing 1040 if you can file 1040NR XVV(2) which is essentially a 1040 without the Cdn income.

On the contrary, those who have GC and elect to file 1040NR must still abide by FBAR, FATCA, etc. Their treaty election to file a 1040NR only applies to the actual version of 1040.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nirvana_1959
Posts: 63
Joined: Fri Mar 18, 2016 9:17 am

Post by nirvana_1959 »

Question on 2018 1040 Proforma Return (for filing 1040NR XVV(2))

Can we use Standard Deduction ?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Yes.

As I have been saying since the trump tax deal broke, for that very reason more and more taxpayers in your situation will be using XXV(2) or 1040 over 1040NR starting this year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nirvana_1959
Posts: 63
Joined: Fri Mar 18, 2016 9:17 am

Post by nirvana_1959 »

Thanks Nelson.

Follow up question... On the 1040NR Itemized deductions: We can deduct only State Tax Withheld (i.e., no mortgage interest and property tax) . Right ?
nirvana_1959
Posts: 63
Joined: Fri Mar 18, 2016 9:17 am

Post by nirvana_1959 »

I did a quick comparison 1040 MFJ versus XXV 1040NR (with 24K std deduction on proforma 1040 and itemized deduction on 1040NR). Difference of $1,500 USD. I think it's worth "spending" $1,500 / year to avoid tons of paperwork :-).
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

It is NOT a lot of paperwork. You don't have to file FBAR etc, all you need to do is report all your income on the fake 1040, and take the deductions, software does this easily.

Now, of course, if saving $1500 in US merley adds $1500 to your Cdn tax, then it is not worth it. But that has always been the case for 1040 XXB(2).

What paperwork are you talking about?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nirvana_1959
Posts: 63
Joined: Fri Mar 18, 2016 9:17 am

Post by nirvana_1959 »

Sorry for the late reply :-(.

1040MFJ I meant filing 1040 using section 6013-6 Election for my wife to be treated as resident for tax purposes. In this scenario FBAR/RRSP/LIRA/TFSA should be reported. Right ?

Comparison of tax under different scenarios:

(1) MFJ 1040: 6,000
(2) XXV 1040 NR: 7,500
(3) MFS 1040 (Wife not included): 9,000

If there is no complexity around additional forms for scenario (1) then I will go with that.

There is no Canadian tax except for ON health tax of $750.
Post Reply