Sorry, I really couldn't find the answer anywhere!A question about MFJ - how to deal with CDN tax
Moderator: Mark T Serbinski CA CPA
A question about MFJ - how to deal with CDN tax
If my husband and I file as MFJ (both working in the US and living in Canada) how do we determine our total foreign tax paid since we have to file separately in Canada? Divide total paid by two? Sorry, I really couldn't find the answer anywhere!
Sorry, I really couldn't find the answer anywhere!-
Mark T Serbinski CA CPA
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Your total foreign tax is the tax as calculated on each of your Canadian returns. For foreign tax credit purposes, you pick up:
Line 435 (total tax payable)
Line 308 (CPP) if any
Line 312 (EI) if any
But... if you are working in the U.S. and living in Canada, a foreign tax credt in the U.S. will only be available for income earned outside the U.S., and not for any additional Canadian tax you pay on the employment income you earn in the U.S.
You can, however, claim a foreign tax credit in Canada for any tax you pay in the U.S. For this purpose, you take the total tax payable on your federal and state returns, and add any social security tax and medicare tax as shown on your W2 forms.
Line 435 (total tax payable)
Line 308 (CPP) if any
Line 312 (EI) if any
But... if you are working in the U.S. and living in Canada, a foreign tax credt in the U.S. will only be available for income earned outside the U.S., and not for any additional Canadian tax you pay on the employment income you earn in the U.S.
You can, however, claim a foreign tax credit in Canada for any tax you pay in the U.S. For this purpose, you take the total tax payable on your federal and state returns, and add any social security tax and medicare tax as shown on your W2 forms.
Mark
Thanks Mark!
Yes, we are both working in the US and living in Canada. If we filed Married Filed Jointly than we both have Fed, State, SS, etc. paid (and I used those numbers) but what happens when we receive a joint refund? Do I just subtract 1/2 that refund from each of our total tax paid in the US?
So let's say we paid $11k him, $10k me (Fed, State, SS, etc.) , and then determined a MFJ refund of $1000 would this mean our total taxes paid in the US (to determine foreign tax credit) would be $10,500 him, $9,500 me?
Yes, we are both working in the US and living in Canada. If we filed Married Filed Jointly than we both have Fed, State, SS, etc. paid (and I used those numbers) but what happens when we receive a joint refund? Do I just subtract 1/2 that refund from each of our total tax paid in the US?
So let's say we paid $11k him, $10k me (Fed, State, SS, etc.) , and then determined a MFJ refund of $1000 would this mean our total taxes paid in the US (to determine foreign tax credit) would be $10,500 him, $9,500 me?
Any tax credit is based on ACTUAL tax OWED, not what was withheld during the year. You will determine any credits based on what you calculate on your tax return.
Any tax you paid will be divided based on the income (as reported on your Cdn return) that went toward it. so if you reporteed $50,000 ain US income a nd hubby reported $25,000 and your fed/state tax were $12,000, then your credit would be based on $8000 tax and hubby's would be $4000.
Whatever you each paid in FICA would remain separate.
Any tax you paid will be divided based on the income (as reported on your Cdn return) that went toward it. so if you reporteed $50,000 ain US income a nd hubby reported $25,000 and your fed/state tax were $12,000, then your credit would be based on $8000 tax and hubby's would be $4000.
Whatever you each paid in FICA would remain separate.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 