Canada foreign tax credit and/or 20(12) deduction.

chemist · Post by **chemist** » Sun Feb 22, 2009 11:44 pm

Hi all,

I realized I have more US tax paid than I would need for federal foreign tax credits (It is sad but is true!).

I just read somewhere that one can make a partial deduction of those excess US tax paid on line 232 of T1 under 20(12). This will lower the taxable income I understand. But I realize this will also reduce my provincial foreign tax credits.

Tried to read and understand 20(12), too complicated for a chemist.
Anyone can clarify?

:?

nelsona · Post by **nelsona** » Mon Feb 23, 2009 6:51 am

Your interpretation is incorrect. Only if your foreign tax credited was limited by treaty would it then become a dedcution. You simply have more than you can use.

nelsona · Post by **nelsona** » Mon Feb 23, 2009 8:22 am

limited by treaty OR STATUTE. Yours was limited by math.

Your two choices are to revisit your US filing to see if there is some deductions etc tha tyou are missing OR, to lkook at your Cdn return, to see if there are some 'optional' dedcutions and credits that you are currently taking that can be postponed to a future year (such as RRSP contributions, or charitable donations, deduction for which which are not required to be takein in the year that they are made).

You would need to give me more info about your US filing status, as I would think that if you are filing 1040NR, you mayhave alternatives.

chemist · Post by **chemist** » Mon Feb 23, 2009 10:12 pm

Thanks a lot. Yes, I am filing 1040NR.

nelsona · Post by **nelsona** » Tue Feb 24, 2009 8:17 am

If yopu are married, there is a article XXV clause which lets you determine a lower tax RATE on your 1040NR, by filling out a MFS 1040, taking advantage of all the tax breaks that are given thee.