Canadian Bank Interest on 1040

[otto]

Hi,

I'm a US Citizen and a Canadian Perm resident.

I have:
Canadian self employment income;

US Dividend Income;

Canadian Bank Interest

On my US 1040 I claimed all of my world income from all sources, ie the three sources above. Then I used form 2555 to exclude my Canadian Income.

But what is the correct way to treat the Canadian bank interest ? On my Canadian return I also had to claim that income so it appears to be getting taxed twice.

When I calculated the foreign tax credit on the Canadian T1 I filled in line 1 for "non-business income tax paid to a foreign country" which includes the taxes I paid to the US for the Canadian bank interest. This amount is then deducted from my "net foreign non-business income". But this only gives me a deduction of income.

Am I doing this correct or am I suppose to get a foreign tax credit for the canadian bank interest on the 1040? If so, how?

Thanks for any help.

[nelsona]

I assume you live in canada.

The tax for your Cdn bank interest is credited on your US return, by form 1116. It is the portion of Cdn tax attributed to your interest (interest/total income)

There is no other foreign tax credit to be taken on your Cdn income, since you excluded your self-employment incoemwth 2555 (you can't exclude anything else with 2555 - just earned income)

Your US dividend income is reported on your Cdn return as well, and up to 15% can be credited on your Cdn return.