Form 1116 with Tuition Tax Credits from Canada

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federovsb
Posts: 3
Joined: Thu Feb 25, 2021 2:04 am

Form 1116 with Tuition Tax Credits from Canada

Post by federovsb »

Hi,

I became a U.S. tax resident in 2021 but am permanently based in Canada.
I want to claim a foreign tax credit on my 1040 using form 1114. However, I won't be paying any taxes on my 2021 Canada income, because all of it will be offset by the federal tuition tax credits I accumulated from prior years.

So, in Canada, I'll be getting a refund on all of the taxes that were withheld from my employment income (roughly $50k). Now, how do I specify all these credits on my U.S. tax return, which doesn't use the same tuition credit carryover system? Do I simply mention the taxes that were 'accrued' up to December 31, 2021 and withheld at source?

In Canada, I can't defer the use of these tuition tax credits, as they are automatically applied.

Thanks for your input!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: Form 1116 with Tuition Tax Credits from Canada

Post by nelsona »

the treatment of those credits is correct. You pay no tax in canada so you cannot claim any in US this year. If you have credits from previous years or from next year you can use them.

But, I need to ask, how are you considered a US resident and based in canada?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: Form 1116 with Tuition Tax Credits from Canada

Post by nelsona »

sorry, just to be clear, you do NOT get any credit
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
federovsb
Posts: 3
Joined: Thu Feb 25, 2021 2:04 am

Re: Form 1116 with Tuition Tax Credits from Canada

Post by federovsb »

I stayed 7 months in the U.S. on an O-1 visa for an arts-related project in 2021, but have no permanent abode there.

So, the best strategy would be to pay the related U.S. tax and then take a foreign tax credit in Canada?

What about the totalization agreement? I have a slip from the CRA that I pay CPP in Canada and don't need to pay into the Social Security system.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: Form 1116 with Tuition Tax Credits from Canada

Post by nelsona »

So, you aren't really a US resident, by treaty
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Re: Form 1116 with Tuition Tax Credits from Canada

Post by nelsona »

How were you remunerated in US? AS an employee (w-2) or as a contractor (1099).
The fact that you stayed 7 months instead of 6 might be a problem, because although you never becae a US resident, your income may be considered US-sourced, and this they will get the full tax for it, and there will be nothing for you to get credit for on your US return.

So, you really need to determine how many actual DAYS you spent in US doing this work, and how you were paid. Hpefully it will be less than 183.

But for Canada there is not much your can do, this is a situation that ALL CDn students who then go earn money in the US face is that their tuition credits cancel out their US tax credits.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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