Canadian working in US, need file both US and Canada income tax return

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

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Fri Feb 22, 2019 1:29 pm

1. You can only claim the losses if these losses do not result in your spouse's total income to be negative. in other words, your total income on the 1040 cannot be less that if it was just you reporting (which would be half the losses). But you would need to report ALL income on the pro forma 1040.
2. Correct.
3. Should be XXV(4).
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sun Feb 24, 2019 9:50 am

Thanks nelsona. Now I know that I need report my rental income in fake 1040, but no need report my wife Canadian income, because her Canadian total income is negative (more rental loss than T4 income). I still need apply ITIN for her at my 1040NR.
Regarding Article XXV (4), it is interesting to find out that no CPA is willing to file my US tax at this way. some of their concern is IRS may challenge.
I would appreciate anybody did Article XXV(4) filing before to share their story, did you receive challenge from IRS? Is there any CPA you can recommend for this special filing method? Thanks

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sun Feb 24, 2019 10:44 am

We have never heard of one here that has had any issues, in 19 years.
You can file this one on your own.
You need a cross-border specialist. But I would not pay one just to do this, since it is so simple, and would end up costing you more than you would save in taxes over just filing a 1040NR.
Remember, you will be paying Cdn tax on all this income anyways, so trying to save a lot of US tax, will merely make your Cdn tax bigger.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Mon Feb 25, 2019 10:43 pm

I was planning to hire someone to do my US tax, but seems no CPA want to try Article XXV(4) for their clients. I can buy RRSP to reduce my Canada tax. For fake 1040. I have problem with my Canadian rental income, regarding house value depreciation, how to calculate? someone told me that I can just divide my house purchasing price by 40, Is it correct? will it be different for a 25 years or 50 years old house? Thanks for advise.

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Tue Feb 26, 2019 8:43 am

40 years is the depreciation rate for foreign rental.
If you have RRSP contribution room, and you live in Canada, you certainly can buy RRSP. It will not reduce your US taxes.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Tue Feb 26, 2019 8:44 am

If you are trying to lower your Cdn tax, then maybe it is not so important to lower your US tax. File 1040NR regular in that case.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Tue Feb 26, 2019 9:35 pm

Thanks for confirming 40 years is the depreciation rate for foreign rental. If I bought the rental house at $400K a few years ago, should I deduct the land value before depreciation? Can I estimate land value is 30% of my purchasing cost?

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Tue Feb 26, 2019 10:10 pm

I believe IRS goes for 80/20 without any question.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sat Mar 02, 2019 2:18 pm

Regarding reporting our Canada rental income in fake 1040 MFJ. Since my wife and myself each own 50% of the house, should we each file schedule E separately or we can just file one schedule E for both? total rental income will be a loss, because of the house deprecation, and for my wife, half of total rental loss for her will be more than her T4 employment income in 2018, so I should not report her rental loss and T4 income in fake 1040 MFJ, because XXV(4) does not allow a deficit of my wife be taken into account in filing fake 1040. Thanks for advise how to file Schedule E at fake 1040.

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sun Mar 03, 2019 10:35 am

She isn't filing, so why would she need to file a form?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sun Mar 03, 2019 2:08 pm

Understand my wife need not report her income in our fake 1040 MFJ per XXV(4), because her total income is a deficit. But I still need report my Canada rental income through Schedule E in fake 1040, I would assume I only need report my portion of rental income and expense, which is only 50%.
Please let me know if I am wrong. Thanks

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sun Mar 03, 2019 4:59 pm

You originally asked should we EACH file separately, or file one JOINTLY. It's neither. You file your portion only.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sat Mar 09, 2019 4:17 pm

Thanks Nelsona for rental instruction. Now I am wondering if I need apply ITIN for my wife, She stays in Canada in 2018. When I file Article XXV(4), i.e fake 1040 plus 1040NR. Because it is fake 1040, I should not need apply ITIN for my wife. It is only to help me get tax rate for my 1040NR.
In the new 1040NR 2018 version. I will choose Married non-resident alien. but the spouse information section has been removed. so I do not need input my wife information in 1040NR. I has no plan to claim any dependents, none of my two kids live with me for more than 6 months in 2018. so my guess is I do not need to apply ITIN for my wife. Thanks for any comment.

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sat Mar 09, 2019 7:16 pm

Thee is nothing on your fake 1040 that requires your spouse's or kids information, so I don't see the need to get ITIN, although she may need it in future. You can't claim anything for her anymore, since the spousal exemption was removed by Trump, replaced with bigger standard deduction.
As I keep telling you, there is no need to go crazy with reducing US tax, BECAUSE YOU ARE PAYING HIGHER CDN TAX ANYWAYS!
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
Posts: 30
Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sun Mar 10, 2019 12:37 am

Nelsona, thanks for your comment. Noted I do not need apply ITIN for my wife.
I already bought Canada RRSP, because I have large RRSP room from previous years. so I will pay little Canada tax even I go Article (4) for US tax.
In fake 1040 I already made with taxact, I chose MFJ and input my wife name, just leave my wife SSN section blank. Do you think I do not need input my wife name in fake 1040? Thanks again for the help.

Post Reply