Hello,
I have a of tax questions with regards to an award that my wife received to pursue her doctorate degree in the US. To start off, here is our background.
We have been living in the US (for 4 years). I am on a H1B and my wife is on a student F1 visa. She was working prior to starting her studies in the US on a TN visa for three years. So we are both considered US residents for tax purposes and have been filling in the US for the past 4 years.
My wife received a stipend (around US$16000) from the university here in the US and she was also recieved an award from Canada. The award is in the total of CAD$20000 per year for three years.
We are both considered non-residents in Canada and as such don't file any tax returns in Canada.
My questions:
1. Will we need to file income tax in Canada for the award money even though we are not living there and we are non-residents in Canada?
2. I am assuming that we need to declare this award as income in the US? If so, can we declare this on my return as a married couple filling jointly. Or does it make sense for us to file separately.
Kind Regards,
yabahala
tax of award money from canada.
Moderator: Mark T Serbinski CA CPA
Normally, students do not get US tax resident status, so do not have to report Cdn-source grants, etc, on their US non-resident return.
But, as your wife broke Cdn ties FIRST, and THEN became F1, your US tax situation is simple: report everything.
The treaty does not shield the Cdn-source income from US taxation because of previous US tax resident status. Besides, trying to claim that she isn't resident (f1 does not accumulate 'days' in US) would make YOUR taxes more, since you wouldn't file jointly anymore, and might even make her US taxes more. CRA could even argue that you are now tied back to Canada.
So, report everything, just like any other US couple.
The question of filing jointly or separately will involve an analysis of your income and your deductions, as well as your state taxes.
Any off-the-shelf tax program does this analysis automatically, or you can force it to do it both ways and then choose.
As for Canada, the grant has to be reported on a Non-resident return (line 104). See non-res tax guide for full instructions.
Any Cdn tax she pays (which will be roughly 23% of her grant net of expenses) can be used as a foreign tax credit, or a foreign tax deduction on your joint 1040, depending on which yields the best tax break.
<i>nelsona non grata... and non pro</i>
But, as your wife broke Cdn ties FIRST, and THEN became F1, your US tax situation is simple: report everything.
The treaty does not shield the Cdn-source income from US taxation because of previous US tax resident status. Besides, trying to claim that she isn't resident (f1 does not accumulate 'days' in US) would make YOUR taxes more, since you wouldn't file jointly anymore, and might even make her US taxes more. CRA could even argue that you are now tied back to Canada.
So, report everything, just like any other US couple.
The question of filing jointly or separately will involve an analysis of your income and your deductions, as well as your state taxes.
Any off-the-shelf tax program does this analysis automatically, or you can force it to do it both ways and then choose.
As for Canada, the grant has to be reported on a Non-resident return (line 104). See non-res tax guide for full instructions.
Any Cdn tax she pays (which will be roughly 23% of her grant net of expenses) can be used as a foreign tax credit, or a foreign tax deduction on your joint 1040, depending on which yields the best tax break.
<i>nelsona non grata... and non pro</i>