Ontario Health Premium as Foreign Tax credit in US Return

[octane99]

Hello, Nelson,

I am pretty sure that I must pay Ontario Health Premium because of my income even I can use RRSP and previous tuition to avoid other Canada Tax. Can I use this Ontario Health Premium as Foreign Tax Credit in my US return?

Thank you.

[Carson]

I don't see why not as it would IMHO meet the definition of a foreign income tax paid to a government. We all know that the "Health Premium Tax" moniker is a fiction as the money goes directly into general revenue of the Ontario government.

[nelsona]

Indeed, this meets all the requirements of a foreign tax eligible for foreign tax credit.

Quebec has had this form of tax for years.

[octane99]

how do I use this credit? In Pub 514

Your foreign tax credit cannot be more than your total U.S. tax liability (line 44 Form 1040) multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources.


Because my taxable income from sources outside the US is 0, does that mean my foreign tax credit limit is 0?

At the end of Pub 514, there is a worksheet for "Additional Foreign Tax Credit on U.S. income*". is this the sheet I should use ?

I know it is compliated, but hopefully, you can give some guidelines. Thanks.

[nelsona]

You do not get to use any Cdn tax as a foreign credit, since mom of the income is foreign. The best you can do is claim a deduction for any Cdn tax THAT YOU OWED AND PAID in 2006 (ifor example, the check you cut last april for your 2005 Cdn taxes) hot for anything that you need to pay now.

THe credit for US-sourced income applies only if Canada would not give you full credit foryour US taxes (this would apply to US-sourced interst and a few other things), I would not worry about this, as you would ony be reducing your US tax (if at all) an adding to your Cdn tax.

[octane99]

This makes sense as US do not have to give me credit for the canada tax accurred on my US income.

You mentioned " THe credit for US-sourced income applies only if Canada would not give you full credit foryour US taxes (this would apply to US-sourced interst and a few other things), I would not worry about this, as you would ony be reducing your US tax (if at all) an adding to your Cdn tax.".

Well, because I have tuition carryover and RRSP in Canada, if I can reduce US tax, I can save money. For example. I paid US tax 10000 ( fed, state, Social security, medicare ), but Canada only give me 6000 as foreign credit ( because I used tuition - I must use , and RRSP to reduce the Federal tax, ). There are 4000 difference, Can I get any credit for this amount in my US tax?

In another words, if I can save US tax, as long as it is above 6000( so I do not have to pay Canada tax), that money is my money.

Thanks.

[nelsona]

When I say "if Canada would not give you full credit foryour US taxes", I am refering to the strict treatuy rules which state that canada need only give credit for US tax that would arise if you were NOT a US citizen/resident.

This does not reallt apply to you.

Remember too, that reducing your US tax just to make your RRSP contribution deductible is not really tax-wise. better to make the contribution and hold on to the deduction until it really does save you full marginal taxes.