Payroll Taxes and Dividend Income

[dowager]

Can we deduct EI and CPP paid on foreign income in the 1040 tax return?

Dividend income from Canada shares - do we include it in the 1040 tax return, and if yes, which box do we use, the taxable amount of eligible dividends or the actual amount of eligible dividends? The actual eligible dividends is already net of withholding tax, I assume. Is the dividend tax credit box the tax paid on dividend income? Thanks.

[nelsona]

If you did not use 2555 to exclude the income, then, yes, cpp and EI paid on that income is included as foreign tax to be used eithr as a deduction,. or more commonly on 1116.

Dividends are to beincluded on 1040. The actual amount, before gross-up and before any withholding.

[dowager]

Dividend - I am confused - I happened to have a T5 which I ought not to have. Which box number would be the one I report in the 1040?

[nelsona]

Why were you not supposed to have T5?

Looking at the T5, I would say that box 24 plus box 10 is the amount you report as dividend income on your 1040.

Determining the Cdn TAX you paid on the dividend would require your to complete your Cdn tax return, and then using boxes 25 and 11 to find a percentage of your Cdn tax, and then minus your tax credit from boxes 12 and 26. Pretty complicated.

[dowager]

I thought T5 is issued to resident, and I kind of left in a hurry and never told the institution that I was not resident anymore. I thought as a NR, I cannot have a T5?

Funny that you mention it is complicated to calculate the dividend tax credit. I took box 10 as my number, and CRA came back and recalculated it, and say aha, you got it wrong, this is the number. LOL

[dowager]

I meant, I used box 26 as the dividend tax credit. Not box 10.

[nelsona]

I thought you were asking about US taxes. Please don't mix the 2. Cdn dividends are easy on the Cdn return, Any software can do it.

Its the US part that's difficult, and what I was trying to explain.

Also, since you seem to have moved mid-year, there is another layer of complexity for your US return.

[dowager]

I did not realize that you were describing the tax paid for 1040 return. I get it that I use box 24 as dividend income, but do not understand how to calculate the tax paid on the dividend. TurboTax is no help on the foreign income part of it. Do I used the dividend tax credit that CRA calculated as the tax paid? Ah, I am so confused.

[nelsona]

For all aspects of foreign tax credit, the Cdn tax you can use is the pure ratio of tax/income: you effective tax rtae. If you reported $50K of ALL income and paid $6000 tax overall. Your effective taxrate is 12%. So if you had $1K of interest on your US return, you get to use $120 towrds the tax credit.

[dowager]

Nelsona, thank you so much for the help.