I have been in Canada 20+ years, but am still a US citizen. I am wondering if I am doing my taxes correctly.
I have investment accounts in both the US and Canada. In the US account I hold mutual funds, stocks and cash. When I file, I claim the capital gains dividends and interest on my Canadian returns first, along with my Canadian sourced investment income. I then file the US return and claim a tax credit for the Canadian taxes paid. I also complete 2555 because I am in a relatively high income bracket. Am I doing this correctly?
I have other questions that I will save for another post unless someone can direct me to the answers. Over the years, I have accumulated 1) IRA's 2) 403B's 3) RRSP's, 4)RESP's., 5) Canadian and US Open investment accounts and 6) I am enrolled in a Canadian pension plan.
U.S. Citizen and permanent resident living in Canada
Moderator: Mark T Serbinski CA CPA
This is THE place for answers.
Specific on your passive income: you should be reporting all the income on both returns, as you are doing. Technically any credit for tax you pay dividends you recieve from US should be claimed on the Cdn return, but why quibble, as long as you are not paying any US tax in theend, you are fine.
You should be reporting RESP income (the income genrated yearly in the account) on your 1040.
Also, I trust you are filing form 8891 for your RRSPs to defer taxation in US until you draw down your RRSPs.
Also, if you have kids, and you aren't getting the childtax credit on 1040, you might consider using 1116 for all your income rather than 2555.
Specific on your passive income: you should be reporting all the income on both returns, as you are doing. Technically any credit for tax you pay dividends you recieve from US should be claimed on the Cdn return, but why quibble, as long as you are not paying any US tax in theend, you are fine.
You should be reporting RESP income (the income genrated yearly in the account) on your 1040.
Also, I trust you are filing form 8891 for your RRSPs to defer taxation in US until you draw down your RRSPs.
Also, if you have kids, and you aren't getting the childtax credit on 1040, you might consider using 1116 for all your income rather than 2555.
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
Thanks for the prompt response. I have two follow-up questions:
I guess my first question is: As a Canadian permanent resident and US Citizen, who has first right of taxation on my US based interest, dividends and capital gains. I have always assumed that I pay Canada first and claim a credit from the US.Is this correct?
As to form 2555, the reason I use this form is because when I do not include it, the AMT kicks in and creates very strange results with my taxes. Am I doing something wrong.
I guess my first question is: As a Canadian permanent resident and US Citizen, who has first right of taxation on my US based interest, dividends and capital gains. I have always assumed that I pay Canada first and claim a credit from the US.Is this correct?
As to form 2555, the reason I use this form is because when I do not include it, the AMT kicks in and creates very strange results with my taxes. Am I doing something wrong.
Interest and dividends arising from your US accoints are definitely sourced in US, and as such are taxable there first. Any relief from taxation must be made by claiming a credit on your Cdn return. cap gains are a little more hazy, but I would go by the rule that all your gains from US accounts would be taxable in US first as well.
To complicate matter for you, Interest and cap gains, which are US sourced do not get ANY Cdn tax credit, because you are only being taxed in US on these because of your US citizenship (a cdn resident who is not US citizen would not pay any tax on interest or cap gains on any US acous they have, thus, by treaty, Canada does not give you, a US citizen, any credit).
Your relief for these comes from filing a 1116 under the "re-sourced by treaty" category (I'll bet you always wondered what that was for), and one re-sources sufficient US-sourced income to reduce the US tax to zero.
So, for other than dividends, the result is as you have been doing, just with a different category of 1116.
To your question as to whether 2555 helps against AMT or not, I have no idea. I'm only mentionning 1116 for your wages to ensure you get any child tax credit you are entitled to. Of course, your decision on 2555 or 1116 on wages should be which one gives you the most back from IRS.
To complicate matter for you, Interest and cap gains, which are US sourced do not get ANY Cdn tax credit, because you are only being taxed in US on these because of your US citizenship (a cdn resident who is not US citizen would not pay any tax on interest or cap gains on any US acous they have, thus, by treaty, Canada does not give you, a US citizen, any credit).
Your relief for these comes from filing a 1116 under the "re-sourced by treaty" category (I'll bet you always wondered what that was for), and one re-sources sufficient US-sourced income to reduce the US tax to zero.
So, for other than dividends, the result is as you have been doing, just with a different category of 1116.
To your question as to whether 2555 helps against AMT or not, I have no idea. I'm only mentionning 1116 for your wages to ensure you get any child tax credit you are entitled to. Of course, your decision on 2555 or 1116 on wages should be which one gives you the most back from IRS.
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
You are truly wonderful, thanks for the help.
I have one additional question it may be a bit off-topic, but never hurts to ask- Is there anyway in all this dual filing to obtain Medicare credits. I want to go back to the US after retirement and receive Medicare benefits. My wife already has enough credits and I am a bit short.
Thanks :D :D :D
I have one additional question it may be a bit off-topic, but never hurts to ask- Is there anyway in all this dual filing to obtain Medicare credits. I want to go back to the US after retirement and receive Medicare benefits. My wife already has enough credits and I am a bit short.
Thanks :D :D :D
I believe that rather than buying credits, you simply pay a premium to be covered. you may need to generate credits. Consult the medicare.gov website.
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
Its great to see that this boad is still up and running.
I have one additional 1116 question and one general question
My Canadian taxes are paid on all income, interest, capital gains combined. How do I allocate taxes paid for the different categories of 1116 I am filing. Do I allocate percentages of total tax to passive vs. general limitation income? How do i do this?
When filing, do I include a copy of my Canadian Tax return with my US taxes return?
I have one additional 1116 question and one general question
My Canadian taxes are paid on all income, interest, capital gains combined. How do I allocate taxes paid for the different categories of 1116 I am filing. Do I allocate percentages of total tax to passive vs. general limitation income? How do i do this?
When filing, do I include a copy of my Canadian Tax return with my US taxes return?
Your Cdn tax is prorated: total tax * (type of income/total taxable income).
You have to jig this a bit for the different way cap gain is calculated in Canada and US, but you can figure it out.
You have to jig this a bit for the different way cap gain is calculated in Canada and US, but you can figure it out.
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
wow that was fast
I appreciate the answer.
but..do I sned a copy of my Canadian tax returns with my US return?
Thanks
but..do I sned a copy of my Canadian tax returns with my US return?
Thanks
One additional 1116 question
Thanks
1116 has to be the most confusing form Ih ave even encountered.
I use turbotax. I have both employment and self employment income in canada. When it computes my gross income for form 1116, it uses my gross wages from my employment and gross revenue from Schedule C. How do I adjust this for my schedule C expenses
1116 has to be the most confusing form Ih ave even encountered.
I use turbotax. I have both employment and self employment income in canada. When it computes my gross income for form 1116, it uses my gross wages from my employment and gross revenue from Schedule C. How do I adjust this for my schedule C expenses
Actually, this is correct. its says right on line 1a "gross income" You must then use the reductions from gross to reduce the income. Line 2: expenses definitely related. the 1116 form applies several 'credit limitations' and then chooses the most limiting one.
I wouldn't worry about the specifics, as long your US tax gets reduced as much as needed.
I wouldn't worry about the specifics, as long your US tax gets reduced as much as needed.
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