F1 non resident of Canada

Roger · Post by **Roger** » Wed Oct 27, 2004 2:19 pm

Hey, I just started graduate school on a F1 visa in Sept. 2003 and I'm wondering if I am eligible for Canadian nonresidency for 2004. I was only present in the USA for 111 days in 2003, but I will be here for the full 365 of 2004. I'm earning ~$30,000 CA as a teaching assistant and have a ~$45,000 CA tuition scholarship. The tuition scholarship is not a part of my disposable income, but as a resident of Canada I was still taxed on it for my 2003 return. Other Canadian students at my school either don't file Canadian returns or falsely claim zero income, but I'm curious if there is a legit way of getting around this. Thanks

Roger · Post by **Roger** » Wed Oct 27, 2004 2:21 pm

Just to clarify, the Canadian federal tax on the teaching income of $30,000 is $3,579 at a rate of 16%. But, the $45,000 scholarship raises my income to $75,000 and an income tax of $13,844. The tuition fees are deducted as a tax credit but at only 16%. The final result is that I have a federal tax liability of $6,644. I get charged an extra $3,065 on the tuition because of the tax rate differentials. Foreign tax credit helps a bit but not much. Thanks.

Nelson · Post by **Nelson** » Wed Oct 27, 2004 2:21 pm

The problem students face is two-fold.
First, their F1 staus requires them to maintain residency outside US for immigration purposes, thus, you are on record as having a Cdn residence.

Second, you days of presence in F1 are meaningless in terms of establishing US tax residency, since these are exempted by IRS rules.

So ANY residential ties (not just major ones) you have in Canada make you resident of Canada for tax purposes, as you cannot claim tax residency in US.

Have you examined the Cdn return for some other tax deductions credits to which you are entitled?

Roger · Post by **Roger** » Wed Oct 27, 2004 2:22 pm

We're allowed the foreign tax credit on the teaching income and 16% of the tuition as credit. Sadly, the tuition gets taxed at 22% up to $64,368 and 26% beyond that. I've already claimed my moving expenses and have maximized my RRSP contributions, but I'm still going to be stuck with a huge CDN tax bill for 2004 without having ever stepped in the country. If there is no way of becoming a nonresident of Canada, I'm not sure what to do. Thanks.

Nelson · Post by **Nelson** » Wed Oct 27, 2004 2:22 pm

and you are paying no tax in US and sate?

Roger · Post by **Roger** » Wed Oct 27, 2004 2:23 pm

Last year I filed both state and federal nonresident alien US tax forms along with a Canadian T1. A small amount of my US employment income was exempt from US tax due to the Canada-US tax treaty, but the majority was taxed both in Canada and the US. Thanks.

Nelson · Post by **Nelson** » Wed Oct 27, 2004 2:24 pm

So, once you include the Fed tax and the state tax as tax credits in Canada, you STILL have a 'huge' (your words, not mine)?
I don't see how a 'portion' of your employment income would have been exempt (either it all should have been , or none of it should have been) but in any event, this doesn't help your overall tax.

Roger · Post by **Roger** » Wed Oct 27, 2004 2:24 pm

Sorry, I wasn't completely clear. My "disposable" income consists of a teaching assistantship and a fellowship. The fellowship is taxed by both countries; the TAship only by Canada due to the tax treaty. The US fed/state tax credits only serve to reduce my net income in Canada (entered on T1 line 232 as "other deductions") from ~75k to ~70k. So I end up paying ~5k tax to the US on the fellowship and ~6k to Canada on the tuition, fellowship, and TAship, for a grand total of 11k tax on my "actual" income of 30k. This effective 36% tax rate is what I'm trying to avoid. Thanks.

Nelson · Post by **Nelson** » Wed Oct 27, 2004 2:25 pm

Huh?
You're claiming the credit wrong.

On schedule 1 there is a section for foreign tax credit. Use this and you will very likely get dollar for dollar CREDIT for those taxes.

There is no provision to give a deduction for foreign taxes, on line 232 or anywhere else.

How did you come up with that one?

You will likely only end up paying ~$1000 to Canada (to your province actually).

I knew there was something fishy about this whole tale.

Nelson · Post by **Nelson** » Wed Oct 27, 2004 2:26 pm

... and when it comes to your TAship, it is only non-taxable in US if it is paid by a Cdn institution, or it is less than $10K US in the calendar year (which may have been the case in 2003; is is in 2004?).
Does this apply to you?