I picked up a copy of QuickTax 2004 and am doing my CDN taxes. I became a non-resident for tax purposes on June 1st 2004 (thats the day my wife came down to join me), but started work in the US on March 1st.
During the 3 months that I worked in the USA while she was in Canada, I paid into a pension plan at my job. I live in Nevada and my work forces us to pay into a private fund instead of social security (apparently Nevada is one of the only states that allows you to do this) and am curious if that would be considered a foreign tax credit on my CDN taxes ? I believe payments into Social Security are tax credits... so would this also qualify since it's being paid in lieu of SS?
Thanks for all your help!!
Payment into Pension Plan deductible?
Moderator: Mark T Serbinski CA CPA
As to Nevada being the only state, I doubt it. many workers in US (particularly Gov't workers) have non-SS plans.
You would have to check if foreign pension is eligible for deduction.
<b>They are NOT, see below. </b>
If it is not, it will not be a foreign tax credit. It will be a non-deductible pension contribution, which you would have to track for future reference when you start taking that money as income. CRA would then allow you to deduct that ammount from the pension income.
<i>nelsona non grata</i>
You would have to check if foreign pension is eligible for deduction.
<b>They are NOT, see below. </b>
If it is not, it will not be a foreign tax credit. It will be a non-deductible pension contribution, which you would have to track for future reference when you start taking that money as income. CRA would then allow you to deduct that ammount from the pension income.
<i>nelsona non grata</i>
Yes. There is no way for a firm to 'partially' opt out of SS. One either is part of SS, or one is not part of SS, and a substitute plan (approved by the SSA) is in its place.
What you have is a substitute plan.
Many large public agencies and state civil services have these.
This is not strictly the same as having a company pension (which would still require paying full SS contribution, like I do).
<i>nelsona non grata</i>
What you have is a substitute plan.
Many large public agencies and state civil services have these.
This is not strictly the same as having a company pension (which would still require paying full SS contribution, like I do).
<i>nelsona non grata</i>
After reviewing CRA info, your US pension contributions are NOT deductible in Canada, so you will have to include these in your 3 months of reportable wages.
You would then keep track of these contributions, should you ever return to Canada, as CRA would allow you to deduct this from any pension income you get from that plan.
By the way, if your wife was planning all along to join you in US, but merely took time to settle up in canada, you could quite justifiably choose Mar 01 as <b>your</b> departure date.
This is usually accepatable in CRA's eyes, especially if you did not make frequent visits back, and you can establish a clear series of events that indicated that your intentions were to both move in March (ie. house on market, notice given at her work, kids registered early for school in nevada, etc).
<i>nelsona non grata</i>
You would then keep track of these contributions, should you ever return to Canada, as CRA would allow you to deduct this from any pension income you get from that plan.
By the way, if your wife was planning all along to join you in US, but merely took time to settle up in canada, you could quite justifiably choose Mar 01 as <b>your</b> departure date.
This is usually accepatable in CRA's eyes, especially if you did not make frequent visits back, and you can establish a clear series of events that indicated that your intentions were to both move in March (ie. house on market, notice given at her work, kids registered early for school in nevada, etc).
<i>nelsona non grata</i>
You would not include the US wages, of course. That would be the whole point.
You would then also not have to worry about foreign tax credits on your T1, etc.
The only drawback is that you would be reducing your personal ammount, instead of 150/366 it would be 60/366 of the basci ammount.
But, I'm thinking that would be more than made up by the Cdn income reduction.
<i>nelsona non grata</i>
You would then also not have to worry about foreign tax credits on your T1, etc.
The only drawback is that you would be reducing your personal ammount, instead of 150/366 it would be 60/366 of the basci ammount.
But, I'm thinking that would be more than made up by the Cdn income reduction.
<i>nelsona non grata</i>
I didn't realize I could do that... my understanding was always that as long as I still had substantial ties to Canada (i.e. my wife was still living there) I was considered a tax resident.
We did always intent on her moving down. We sold our home in Dec '03 and rented a suite until she moved down. The only reason why she stayed in Canada was to allow me a chance to try out the job and make sure it was what we really wanted to do (or should I say what I really wanted to do, lol).
Keeping that in mind, I'm not sure that I could show a clear pattern of events that showed she intended on also moving March 1st.
We did always intent on her moving down. We sold our home in Dec '03 and rented a suite until she moved down. The only reason why she stayed in Canada was to allow me a chance to try out the job and make sure it was what we really wanted to do (or should I say what I really wanted to do, lol).
Keeping that in mind, I'm not sure that I could show a clear pattern of events that showed she intended on also moving March 1st.
Its your call.
Work out your departure return both ways:
1. departure date mar 01, including only Cdn income.
2. departure date Jun 01, including US income for 3 months, no pension deduction, and ~3/10ths of your US taxes (final fed and final state) towards the foreign tax credit.
If the difference is small, stick with Jun 01, you are safe with that date. Trouble is, it is usually pretty complex to try and figure exactly what your final US tax liability is for this first year as there are so many options.
These are described elsewhere, so I won't go thru them here, as this was not your question.
<i>nelsona non grata</i>
Work out your departure return both ways:
1. departure date mar 01, including only Cdn income.
2. departure date Jun 01, including US income for 3 months, no pension deduction, and ~3/10ths of your US taxes (final fed and final state) towards the foreign tax credit.
If the difference is small, stick with Jun 01, you are safe with that date. Trouble is, it is usually pretty complex to try and figure exactly what your final US tax liability is for this first year as there are so many options.
These are described elsewhere, so I won't go thru them here, as this was not your question.
<i>nelsona non grata</i>