tax credit or deduct income?

readtheform · Post by **readtheform** » Wed Mar 02, 2011 11:15 pm

2010 is the first year I was full year resident in Canada. Canadian salary is the bulk of my income, with also some investment income from the US.

I need to make choice on US taxes to take tax credit for Cdn taxes on salary or to deduct my Canadian salary from my taxable income.

Why would I choose or the other? Before I do all my taxes both ways, are there some basic rules of thumb on this?

IRS says this is irrevocable choice. Does that mean it is irrevocable for just 2010 taxes (ie I can't change 2010 1040 later on) or is it a choice that I have then irrevocably made for future years as well?

Thank you.

nelsona · Post by **nelsona** » Sun Mar 06, 2011 11:11 am

Generally, either way will yield no extra tax in US on your cdn income, so using 2555 is simpler. If you have kids however. you want to use 1116 as this will get the credit but 2555 will not.

You will still need to use 1116 on non-wage Cdn income.