I lived in the US from November 2000 - May 2008 (on TN1s only). For my last year, I realize I have a choice between filing a dual status return 1040NR and just including my US income or filing a 1040/1116/2555 and including my world income.
I have no dependents, and I am single. My US wages in 2008 were 50K, 2K capital loss, and 1K in interest income. I received all my US income before I moved back to Canada, and I have no deductions (other than the standard). The Canadian income I earned after moving back to Canada has resulted in only a $700 tax liability in Canada due to a 20K tuition carryover I still have from 2000 when I left. So this doesn't help me out much with foreign tax credits on 1116.
From what I've read on the forum, the 1040 is 9/10 the way to go in your last year of residency in the US. However, when I do the math, the 1040NR comes out ahead, and I even get a refund (AMT is not triggered). Using the 1040/2555/1116 or 1040/1116, I actually owe more tax.
Does this make sense given my filing status, lack of deductions, and low Canadian tax liability? It seems too good to be true that I can just file a simple 1040NR like my first year down there and be done with this.
Thank you for any feedback you may have.
Last year of residency in US - 1040NR numbers are better?
Moderator: Mark T Serbinski CA CPA
1040 is TYPICALLY the way to go. But, of course, most returning Cdns don't have $20K of unused deductions lying around.
And, 1040 single and 1040NR are not very different. 1040 full year benefits married most.
Another way to look at it is that using the tuition deduction in 2008 may not give you the best return, since you are paying down Cdn tax simply to raise (or more correctly, not lower) your US tax. You might think about -- if allowed -- postponing using the tuition to next year. This will give you Cdn tax which you can use against your US tax (on 1116) and leave your tuition credit for a better year. (You might not be allowed that, check the rules on the tuition credit).
In any event, as when entering US, one should run their taxes using all options and then pick the best one.
And, 1040 single and 1040NR are not very different. 1040 full year benefits married most.
Another way to look at it is that using the tuition deduction in 2008 may not give you the best return, since you are paying down Cdn tax simply to raise (or more correctly, not lower) your US tax. You might think about -- if allowed -- postponing using the tuition to next year. This will give you Cdn tax which you can use against your US tax (on 1116) and leave your tuition credit for a better year. (You might not be allowed that, check the rules on the tuition credit).
In any event, as when entering US, one should run their taxes using all options and then pick the best one.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best