As a dual citizen, resident of Canada, I have a US based rental property. My understanding is that rental income for this property is US sourced, therefore subject to tax in the US. However, due to deductions, no tax has ever been due in the US. This income does however, get taxed by the CRA. Can one then claim the FTC against this tax, even though it is US sourced?
Sorry if this has already been covered, I dug though past postings but didn't see anything that quite addressed this.
FTC and US rental property
Moderator: Mark T Serbinski CA CPA
Re: FTC and US rental property
You can only claim actual US tax paid as a foreign tax credit. If none is owed, none can be claimed.
You are reporting ALL your income on your 1040, I presume, nit just your rental income? You are required to do so.
You are reporting ALL your income on your 1040, I presume, nit just your rental income? You are required to do so.
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Re: FTC and US rental property
Perhaps I wasn't clear, but I end up paying no US tax on the rental property. However, I do end up paying tax on it in Canada. My question is whether that Canadian tax paid can be used for the FTC as an additional credit.
Any yes, all my income from all sources is reported on both US and Canadian returns.
Any yes, all my income from all sources is reported on both US and Canadian returns.
Re: FTC and US rental property
So, just to clarify, which your second post didn't, are you asking if you can claim the Cdn tax on your US return as a foreign tax credit? If so
No, for two reasons: first, foreign tax credit can only be used against US tax paid, which as you say is none.
Second, foreign tax credit can only be used against US tax paid on foreign income. This income is US-sourced.
What you can do is use ANY Cdn income tax you paid in the tax year (that was not refunded) as a DEDUCTION on your US 1040 schedule A. But you would need to itemize and exceed the standard deduction. But, again, since you pay no US tax, there in no point doing this.
You can't use FTC or Schedule A to create a refund if you already pay no US taxes for the year.
No, for two reasons: first, foreign tax credit can only be used against US tax paid, which as you say is none.
Second, foreign tax credit can only be used against US tax paid on foreign income. This income is US-sourced.
What you can do is use ANY Cdn income tax you paid in the tax year (that was not refunded) as a DEDUCTION on your US 1040 schedule A. But you would need to itemize and exceed the standard deduction. But, again, since you pay no US tax, there in no point doing this.
You can't use FTC or Schedule A to create a refund if you already pay no US taxes for the year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Re: FTC and US rental property
Understood. Yes, I wasn't looking for the credit to provide a US refund. I was more interested in understanding how surplus credits could be potentially carried forward to future tax years.
But you have answered my question. The income sourcing rules means that foreign tax on this income is not eligible for US credits.
Thanks.
But you have answered my question. The income sourcing rules means that foreign tax on this income is not eligible for US credits.
Thanks.
Re: FTC and US rental property
But your other (Cdn) income and the Cdn tax related to that income that you report on your 1040 can be included on the a 1116 form (in the correct categories), for carryforward. Most don't bother, but it is doable.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing