Dividends from US brokerage and form 1116

[RobC]

Hi there! I'm a US Citizen residing and working in Canada. My income sources are Canadian wages, Canadian bank interest, US bank interest, and dividends from my US-based brokerage account, containing all US-domiciled ETFs. I'm wondering about how to properly report dividends from my US brokerage:

1. On US tax forms: Shall I use one of my form 1116's to re-source my US bank interest and dividends combined, or do I need to separate them?

2. On US tax forms: When I enter the dividends into my US tax forms, should I do it like most citizens residing in the US would, in that they would separate qualified dividends, non-qualified dividends, REIT dividends, etc. in order to apply the appropriate US tax rates, or does my re-sourcing of the dividend income (to Canada) change the way I report and compute things on the US tax forms? I saw a similar question from last year on the forum, but that person was using a Canadian brokerage account, so I'm not sure if that answer applies to me. In my case, all my dividends are from US-domiciled ETFs in a US-based brokerage, and no US taxes were withheld.

3. On Canadian tax forms: Is it correct that when I file my Canadian tax forms, all the dividends from my US brokerage are simply treated as income from foreign sources (like bank interest) and are not eligible for any special dividend tax rates or credits, because as far as Canada is concerned, those are all foreign dividends, even if some of those US-domiciled ETFs include Canadian companies?

4. On US tax forms: If Canada is taxing my US dividends as regular income, do I need to do anything special on my US tax return if my Canadian tax bracket is greater than 15%, given that the qualified dividend tax rate for me in the US would be 15% ?

Thank you in advance!

[nelsona]

1. Interest, yes. But US dividends ARE taxable in US for Cdns, so there is nothing to re-source, unless your EFFECTIVE taxrate in US is more than 15%,which is unlikley.

2.No change.

3.Correct.

Tip: If you invest in CDn companies that are traded in the US exchanges, your dividends will both be qualified in US, and eligible for dividend tax credit in Canada.


Also, remeber that as aCdn resident, your uS broker is NOT allowed to work with you. You should be closing that account.

[RobC]

Thanks for your quick reply! Regarding question 1, since I can't re-source the US dividend income to Canada, does that mean I'll be double-taxed, or will I be able to claim a foreign tax credit or something either on my US or Canadian returns? If not, does the tax treaty somehow limit my tax rate?

Most of my online searches turn up material that's geared for non-US persons residing in Canada, so they talk about the W-8 BEN and 15% withholding tax, which I guess doesn't apply to me as a US citizen, which is why I'm a bit unclear on this.

[nelsona]

You will claim on your Cdn return, just like any other US income.

Whjen you do your US taxes, you will see that you are nowhere near taxed 15% on your income, so there is no need to apply any limits.