US - How to use foreign tax credit

[elgoog]

Hi,

I moved to US from Canada in September 2021. Throughout 2021, I was working for a US-based employer. Even though I am now a US tax resident, I will have some trailing Canadian income due to some stock grants that were granted while I was in Canada. This is based on the number of working days in Canada.

1. Even though 1040-NR is much easier, does it makes more sense to file a dual-status return for 2021 so that I can claim those credits?
2. Since Canadian income tax is so much higher than US, I will have unused FTC in the US that I can carryover. Can those carried over FTC amounts only be used if I have Canadian source income in future years as well?

Thank you.

[nelsona]

1. As I have probably mentioned in your other posts it is almost NEVER useful to do dual status. You are only trying to reduce US tax. Not having to report Cdn income is the best way to reduce US tax, so 1040NR if allowed is best. Then FULL YEAR is next, because it allows for full deductions, which dual does not.

2. Yes, FTCs can be carried forward, but it is unlikely that you will ever use them, since most Cdn income that you could recieve in future will have its own Cdn tax to use in those years.

File 1040NR. or file 1040. No dual.

[elgoog]

Yes, I forgot that 1040-NR is only US-sourced income and since you can get FTC only up to the amount of US tax, dual doesn't make sense. In most future years, Cdn income tax will be higher than the US one.

So for the part of the year I am a Canadian non-resident, is there a way for me to claim the FICA taxes on my Canadian return?

[nelsona]

Of course. You will claim on your Cdn return, the portion of federal and state taxes,(as determined on your US returns), as well as FICA related to the portion of the US wages you INCLUDED on your Cdn return.