Complex tax situation for a Canadian in US on TN

eunicebiz · Post by **eunicebiz** » Mon Nov 28, 2005 3:11 pm

First of all, thanks in advance for any thought/advice. I am a Canadian Citizen, moved to US for a job in Jan under TN. I have a few questions:

1. I only worked in Canada for three weeks this year, I have to file both US and Canadian Tax as a resident for this year. Correct?

2. My parents are living Canada with immigration visa sponsered by me. Are they my dependents/ties to Canada, so in the future, as long as they live in Canada, do I need to file tax as a resident?

3. I am thinking to buy a house under my name in Canada, instead renting out for investment, I will let my parents live in there. Is this considered residential status in Canada? Can I claim my mortgage interest in Canada for my US tax credit?

4. I have both RRSP and 401K now. Can I leave RRSP in Canada until I am retired? If I have to pay both side tax, do I have to pay Canadian tax for my 401K? If so, how about the part that my company matches?

5. If I have paid both side tax, how much difference roughly will it be? I am single, no kids, software engineer type of job...

6. If I keep paying tax to Canadian side even though I live and work in US, do I get any credit for government retirement plan? (I used contribute while working in Canada, I forgot the name for it. Not RRSP)

Thanks all

nelsona · Post by **nelsona** » Mon Nov 28, 2005 3:39 pm

<blockquote id="quote">quote:<hr height="1" noshade id="quote">1. I only worked in Canada for three weeks this year, I have to file both US and Canadian Tax as a resident for this year. Correct?<hr height="1" noshade id="quote"></blockquote id="quote">
No. In canada you will be a "Emigrant" as of Jan 21, 2005, and should indicate this on your 2005 return, and follw the directions of the "Emigrants" guide from CRA, next spring.

Your US tax return will be a resident tax return, so long as you include your Cdn income. See IRS publication 519.
<blockquote id="quote">quote:<hr height="1" noshade id="quote">2. My parents are living Canada with immigration visa sponsered by me. Are they my dependents/ties to Canada, so in the future, as long as they live in Canada, do I need to file tax as a resident?<hr height="1" noshade id="quote"></blockquote id="quote">
No. your parents are not a residential tie.
<blockquote id="quote">quote:<hr height="1" noshade id="quote">3. I am thinking to buy a house under my name in Canada, instead renting out for investment, I will let my parents live in there. Is this considered residential status in Canada? Can I claim my mortgage interest in Canada for my US tax credit?<hr height="1" noshade id="quote"></blockquote id="quote">
This would be considered a residential tie, and would require you to file as a Cdn tax resident (or request deemed non-resident status).

Home mortgage interest would be deductible only if it was your home or second home. The interest on an investment is always deductible, so long as there is a profit intention, which is not always clear in cases where family is 'renting'.
<blockquote id="quote">quote:<hr height="1" noshade id="quote">4. I have both RRSP and 401K now. Can I leave RRSP in Canada until I am retired? If I have to pay both side tax, do I have to pay Canadian tax for my 401K? If so, how about the part that my company matches?<hr height="1" noshade id="quote"></blockquote id="quote">
There are other threads dealing with this....happy browsing[;)]
<blockquote id="quote">quote:<hr height="1" noshade id="quote">6. If I keep paying tax to Canadian side even though I live and work in US, do I get any credit for government retirement plan? (I used contribute while working in Canada, I forgot the name for it. Not RRSP) <hr height="1" noshade id="quote"></blockquote id="quote">
No you will not be building CPP credits while employed in US; your will be building US Social security (SS) credits instead. there are other threads that explain CPP/SS issues.

nelsona non grata... and non pro

eunicebiz · Post by **eunicebiz** » Mon Nov 28, 2005 8:28 pm

Thank you very much nelsona

Regarding to ques #3 buying a home, what cons and pros if I buy a home under my parents names?

If later on my parents sale the home, pay me back the money, is it considered I am accepting gift from them?

Thanks a lot

nelsona · Post by **nelsona** » Tue Nov 29, 2005 8:50 am

Wheter or not it is considered a gift from your parents, it will have no bearing on your taxes.

However, you buying them a house could be considered a gift by you to them, and this would inmpact your US taxes; you woiuld be liable for gift tax.

nelsona non grata... and non pro

eunicebiz · Post by **eunicebiz** » Tue Nov 29, 2005 2:36 pm

Not intending to claim tax for giving gift. Just want to make sure if the house is under my parents name, one day they sale it, pay me back, I won't be taxed again.

Question is how CRA trace tax for gifts? If I write my parents a check now, few years later, they return the money to me, do we have to report tax and pay tax for each "transaction" within family?

nelsona · Post by **nelsona** » Tue Nov 29, 2005 3:26 pm

<blockquote id="quote">quote:<hr height="1" noshade id="quote"> Not intending to claim tax for giving gift.<hr height="1" noshade id="quote"></blockquote id="quote">

Its not a matter of you 'claiming' it is a gift, it is the IRS that will say it is a gift and tax you, the GIVER. That is how gift tax works in US. The one GIVING is taxed, not the recipient.

And, unless carefully structured, buying the house in soemones name is constituted a gift.

CRA opn the other hand does not care about gifts between adults, other than wife. When they sell it back to you there will be no tax either.

nelsona non grata... and non pro

Jaspal · Post by **Jaspal** » Thu Dec 01, 2005 10:15 am

Nelson,

In this case, don't you think the money transfer to parents could be considered a no-interest loan, for which necessary paper work can be kept. When home is sold parents can return the money. They may also just 'give away' the capital gain to their child (which, I believe, should not have any tax implications in Canada/US).

Jaspal

nelsona · Post by **nelsona** » Thu Dec 01, 2005 11:13 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">unless carefully structured, buying the house in soemones name is constituted a gift.<hr height="1" noshade id="quote"></blockquote id="quote">

You can come up with your own ways, I simply said it had to be carefully structured.

A no interest loan is considered a gift by IRS:

http://www.usatoday.com/money/perfi/col ... oans_x.htm

nelsona non grata... and non pro