Canada FTC for Obamacare tax

[henrimb]

Hi,

I'm a US citizen living in Canada. When computing the Canada FTC, can the Obamacare tax (paid to the US on form 8960) be included? There seem to be conflicting opinions on this. Some people have been denied a FTC for the Obamacare tax by the CRA, while others seem to have claimed it.

If Obamacare tax cannot be claimed via an FTC in Canada, can it be taken as a deduction under sections 20(11) or 20(12)?

Any clarification would be much appreciated.

Thanks very much.

[nelsona]

First off, it is a tax that would not be paid if you a Cdn resident who was not a US citizen , so right off the bat, it cannot be claimed as a foreign tax credit. That is by treaty.

There is some debate as to whether this tax is a Medicare tax or an Income tax, but, regardless, both these taxes defined by treaty as taxes. They would thus fall under those categories of tax that CRA denies, allowing application of the treaty, not necessarily 20(11) -- which the excess of 15% provision, maybe 20(12), but certainly treaty article XXIV(4) -- which is deduction of disallowed US tax on line 232, followed by re-sourced 1116.

It is here where there may be a problem, since IRS views NIIT as a Medicare tax, and might not allow the re-sourced 1116 on this tax.

But, in my opinion, for purposes of one's Cdn tax return, this tax falls under the category of tax that would not be paid but for being a US citizen, (like, say US sourced bank interest, or tax on dividends in excess of 10%) and can be used as a deduction deducted.