In June 2008, I moved from Canada, To the United States filed my departure return in Canada. We Sold a Primary residence in Canada Before moving and bought our First house in the US. At the time I didn’t think I qualified to take the $7,500 first time home buyer tax credit (The one that has to be paid back over a 15 year period) because we had owned a primary residence in Canada, but I have come to find out we did qualify and that owning a home in Canada Does not disqualify you from this credit.
If I decide to take this interest free loan from the IRS by filing 1040X for 2008 how does it affect my departure return that I did for Canada for 2008?.
Since it has to be paid back over a 15 year period to the IRS not sure what to do as far as my 2008 Departure return that I did for Canada.
Thanks for your help.
Filing 1040X & 2008 Departure return
Moderator: Mark T Serbinski CA CPA
Unless your reported US income on your Cdn return (which should not be the case if you moved at the same time you took the US job), the reduction in US tax (that is what it is), should have no impact on your Cdn departure return, since you should not have any US tax credit on that return.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Nelsona as always thank you for your response, unfortunately I do not fall into what you described, I had been living in Canada and Commuting to the US for work for years, so my departure return all my income was all US based.
The total foreign tax credit I took between Federal + FICA+ State, The federal portion was around $3,000.
So if I understand it correctly if I filed 1040X for the $7,500 for 2008 I would have to send $3,000 of that to Canada. Well I don’t think I will be doing that anytime soon.
If I qualified for the new and improved $8,000 Home Buyers Tax credit that didn’t have to be paid back, that would be an easier pill to swallow.
But because the $7500 even though they call it a credit, it really a loan because it must be paid back over time to the IRS, out of the $7500 I would only be able to keep $4,500, ($3000 sent to Canada) but still owe the hole $7500 amount to the IRS.
I have given Canada enough money over the years, I’m not giving them anymore.
The total foreign tax credit I took between Federal + FICA+ State, The federal portion was around $3,000.
So if I understand it correctly if I filed 1040X for the $7,500 for 2008 I would have to send $3,000 of that to Canada. Well I don’t think I will be doing that anytime soon.
If I qualified for the new and improved $8,000 Home Buyers Tax credit that didn’t have to be paid back, that would be an easier pill to swallow.
But because the $7500 even though they call it a credit, it really a loan because it must be paid back over time to the IRS, out of the $7500 I would only be able to keep $4,500, ($3000 sent to Canada) but still owe the hole $7500 amount to the IRS.
I have given Canada enough money over the years, I’m not giving them anymore.
Yeah, I don't see anyway around having this considered a 2008 tax reduction.
Although, technically it is considered as a "credit" on the tax form (almost as if you had made an extra tax payment during the year), it is lumped with other items that would clearly be considered tax reductions. For example each state had to pass special legislation to prevent the credit from reducing the fedearl income tax deduction on their returns. Canada of course would not have made such a distinction.
The reduction in the federal tax crddit would be the prorated amount based on the portion of US income you reported on your Cdn return. Of course if your home buyers credit wiped out your fed tax completely, it would ge all gone for tax credit purposes too.
Of course If you continued to live in canada, you would be increasing your US tax credit by $500/yr going forward.
Although, technically it is considered as a "credit" on the tax form (almost as if you had made an extra tax payment during the year), it is lumped with other items that would clearly be considered tax reductions. For example each state had to pass special legislation to prevent the credit from reducing the fedearl income tax deduction on their returns. Canada of course would not have made such a distinction.
The reduction in the federal tax crddit would be the prorated amount based on the portion of US income you reported on your Cdn return. Of course if your home buyers credit wiped out your fed tax completely, it would ge all gone for tax credit purposes too.
Of course If you continued to live in canada, you would be increasing your US tax credit by $500/yr going forward.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
[b]"Of course If you continued to live in canada, you would be increasing your US tax credit by $500/yr going forward"[/b]
If this where the case I wouldn’t even qualify for the $7500
Ya I see no way around this either. Taken the credit would wipe out all my federal taxes that I would have owed in 2008, thus the $3,000 Federal portion that I used for my tax credit, would become due and payable in full to Canada.
Although I would love to have this interest free money I’m not about to giving any of it to Canada since in realty it a loan and not a true credit.
My only option in not paying Canada is not to tell them, but I have always been honest in doing my taxes, for fear of retribution in the future.
If this where the case I wouldn’t even qualify for the $7500
Ya I see no way around this either. Taken the credit would wipe out all my federal taxes that I would have owed in 2008, thus the $3,000 Federal portion that I used for my tax credit, would become due and payable in full to Canada.
Although I would love to have this interest free money I’m not about to giving any of it to Canada since in realty it a loan and not a true credit.
My only option in not paying Canada is not to tell them, but I have always been honest in doing my taxes, for fear of retribution in the future.
I’m a permanent resident the US, I would always have to file taxes.
But Yes I have looked into it, the remaining amount would be due in Full.
If I sell the house repayment is depended on how much capital gain if there is no gain the remaining amount is basically forgiven.
Work similar to the Home Buyers Plan in Canada, which I was involved in when I was living in Canada. Other than you can sell your home and not have to pay back the entire amount at once.
But Yes I have looked into it, the remaining amount would be due in Full.
If I sell the house repayment is depended on how much capital gain if there is no gain the remaining amount is basically forgiven.
Work similar to the Home Buyers Plan in Canada, which I was involved in when I was living in Canada. Other than you can sell your home and not have to pay back the entire amount at once.
Nelsona wondering if you could help clear up something, I have been looking into this further. The form needed to take the first time home buyers credit is form 5405. The results of 5405 (My case it would be $7500) would be moved to my 1040 which goes under the PAYMENT section line 69.
Now in the past whenever I have figured my foreign tax credit for Canada, I would always use the amount in line 61, because this is my total tax owed to the IRS, form 5405 does not change this number I still owe the amount of line 61.
Now if the credit was on any line above 61 (Where other credits go) then this would defiantly change line 61 thus changing my foreign tax credit I reported to Canada.
I have looked this over several times and would just like another opinion…
As always thank you for your time.
Now in the past whenever I have figured my foreign tax credit for Canada, I would always use the amount in line 61, because this is my total tax owed to the IRS, form 5405 does not change this number I still owe the amount of line 61.
Now if the credit was on any line above 61 (Where other credits go) then this would defiantly change line 61 thus changing my foreign tax credit I reported to Canada.
I have looked this over several times and would just like another opinion…
As always thank you for your time.
[quote="Greg"]Nelsona wondering if you could help clear up something, I have been looking into this further. The form needed to take the first time home buyers credit is form 5405. The results of 5405 (My case it would be $7500) would be moved to my 1040 which goes under the PAYMENT section line 69.
Now in the past whenever I have figured my foreign tax credit for Canada, I would always use the amount in line 61, because this is my total tax owed to the IRS, form 5405 does not change this number I still owe the amount of line 61.
Now if the credit was on any line above 61 (Where other credits go) then this would defiantly change line 61 thus changing my foreign tax credit I reported to Canada.
I have looked this over several times and would just like another opinion…
As always thank you for your time.[/quote]
I guess what I’m saying is originally I thought that by taking the credit it would totally eliminate all my us tax owed line 61, but because this amount is in the payment section on line 69 on the 1040 it does not. I still owed the amount on line 61 thus still entitled to take it as a foreign tax credit on my Canadian return.
Now in the past whenever I have figured my foreign tax credit for Canada, I would always use the amount in line 61, because this is my total tax owed to the IRS, form 5405 does not change this number I still owe the amount of line 61.
Now if the credit was on any line above 61 (Where other credits go) then this would defiantly change line 61 thus changing my foreign tax credit I reported to Canada.
I have looked this over several times and would just like another opinion…
As always thank you for your time.[/quote]
I guess what I’m saying is originally I thought that by taking the credit it would totally eliminate all my us tax owed line 61, but because this amount is in the payment section on line 69 on the 1040 it does not. I still owed the amount on line 61 thus still entitled to take it as a foreign tax credit on my Canadian return.
While the terms of the credit are unusual, they are decresing the tax PAID and OWED for 2009, which is the only criteria Canada will go by.
In any event, you wiull be submitting your 1040 with your Cdn return, They will decide.
In any event, you wiull be submitting your 1040 with your Cdn return, They will decide.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing