Calculating the amount on like 25600

[Bubba Gums]

US resident earning Canadian source employment income. Work performed in both Canada and the US. I am counting work days in each location and excluding the US portion as allocated on a per diem basis on line 25600. What about the deductions (RRSP, Pension, Union) I think these are permitted.

Is the line 256 amount calculated using the % allocation * total income or net income? Must I also make an allocation for deductions?

[nelsona]

The Cdn deductions are ALL eligible to be included on your Cdn return, regardless of where the income is earned. Same for your RRSP deductions. It is the gross wages (the % of total wages) earned in US that is excludable on 256.

The non-excluded portion (the wages earned while in canada) are then used on your 1116 foreign tax credit calculation. The RRSP (if done through work) and pension contributions reduce your gross wages for the year on your US return. EI/CPP and your calcualted fed/prov taxes are used on 1116.

[Bubba Gums]

Thanks Nelsona,

How does this play out on Schedule A/B for determining which credits one is eligible for. It would seem that one would still get full credits if >90% as this comes from line 23600. Is that correct? Perhaps the excluded income deducted on 25600 is written on "Income from sources outside Canada," and thus limiting credits?

[nelsona]

Report as indicated on schedule A, which means including your wages from Cdn-source (it is all from Cdn-source after all).

CRA will adjust if they want to say the treaty-exempt income reported on 256 doesn't count.