Child Tax Benefit in US return and CRA rules

[wimzieguy]

Hi,

I have claimed child tax benefit for my three kids when I file for US returns (Canadian citizen working in US on TN and living in Canada). CRA reduced my paid tax amount to US by $3K.

Is this the way tax calculation works?

Any ideas/comments?

Thanks.
Wimzie

[nelsona]

I don't understand your question.

There is no link between child tax benefit a nd US tax paid.

A little clearer please.

[wimzieguy]

ok, here is another try.... when u file taxes to IRA (US), you can claim child tax benefit, i.e $1000 per child. In my case, CRA reduced my tax amount paid to US by the amount of child tax claim, which was $3000 in my case. This has reduced "foreign taxes paid" amount considerably, thus resulting in extra canadian taxes for me. CRA did sent me a letter explaining this deduction as they claim that I have to reduce my "foreign taxes paid" amount by deducting actual child tax claim amount.

Does this make some sense now?

[nelsona]

CRA is correct. You determine your US tax by the total US tax paid, AFTER all deductions, exemptions and credits, etc. The child tax credit reduces your taxes, thus you paid $3000 less US taxes than you would have had you not recieved the credit.

In the end you paid $XXXX to IRS (it is IRS by the way, not IRA). That total is the amount that was withheld during the year, minus your refund. So you can't claim more than this on your Cdn return.


That is why it is not always beneficial to reduce one's US tax bill too far, as it results in more Cdn tax. You were correct to apply for the child tax crdit, it's just that it doesn't really benefit you, since your final tax obligation is to canada. It is on the Cdn return that you need to be focussing on reducing the tax, by using RRSP, etc.

[wimzieguy]

nicely explained!

Thanks a bunch.

[clarkden]

hi guys

can any one tell me about child tax.

plz its urgent

Clarkden
[url=http://www.bondconsulting.ca] sr&ed ontario [/url]