US Greencard Holder with "Significant Ties" in Canada

[ofilispeaks]

Quick summary of my situation and question ...

I am a US green card holder whose wife and son lived in Canada in 2021 (significant ties). I got my Canadian PR in October of 2021.

I spent 75% of my time in America, while my Wife and son stayed in Canada 100%. The reason why my wife cannot come to America is because of Immigration delays for her paper work.

US Tax: I have completed my US Tax form 1040. My [Gross income in 2021] came from a US based company and I applied the standard deduction (Married filing jointly) of $25,100 USD to reduce my Gross income [now my Taxable income]. And I paid about $7,000 USD in taxes to the IRS based on the Taxable income.

NOTE: My Wife made no income in 2021 as she is in school.

My Canada Tax question is thus ...

1. Based on the significant ties rules (wife and son in Canada), even though I stayed in American 75% of the time and worked with a US company, am I expected to file my 2021 Canadian taxes as a resident? I have read that the treaty nullifies this but still don't understand how.

2. And if [yes], do I file Canada taxes based on my [Gross US Income] or [Taxable US Income]. Essentially is the USA standard deduction recognized in Canada.

[nelsona]

1. Not necessarily. If your family moved to Canada and you did not, then you are not yet Cdn tax resident. The only trouble is that you seem to have spent a lot of time in Canada, you should limit your vists to canada, and have them visit you instead.

2. If you did indeed become CDn tax resident (i do not believe you have) then you would report world income from the date you established residential ties. You would report this income the same manner any other Cdn resident would, regardless of how taxes are calculated in US.

Then you would get a foreign tax credit on your CDn return for the portion of US tax related to the US income you reported in canada.

[ofilispeaks]

Thanks so much for the clarity. #2 response below confuses me a bit:

"Then you would get a foreign tax credit on your CDn return for the portion of US tax related to the US income you reported in canada."

- If I earned $100,000 USD gross in the US (for this example, the tax rate is 25%) and was to pay tax of [$25,000].
- But then I applied the standard deduction of $25,100 to bring my taxable income to $74,900 and then paid tax to US government of [$18,725]

Will my foreign tax credit be the actual [$18,725] I paid or the [$25,000] I would have paid without the standard deduction. My main confusion is the standard deducation.

[nelsona]

It would be (IF you were Cdn resident) the tax allotted to the income your re[port in canada, after all deductions have been taken in US.

for example, if you earned $100,000 in US and reported $50,000 of it in Canada, you would get to use HALF of the tax you determined on your US return for the year. Same for any state tax, and for any FICA (if it was wages).

[ofilispeaks]

Thanks nelsona. I paid for a consultation with Serbinski, but they are not taking anymore consultation till May 2022. And I am still not clear on this. I will try and ask the question again.

- If I earned $100,000 USD gross in the US for a US company (for this example, the tax rate is 25%) and was to pay tax of [$25,000].
- But then I applied the standard deduction (married filing jointly) of $25,100 to bring my taxable income down to $74,900 and then paid tax to US government of [$18,725]. My questions are:

1. What amount do I report on my Canadian tax? is it the $100,000 USD or $74,900 USD?
2. And what foreign tax credit can I claim? is it $25,000 or the actual $18,725 I paid?

[nelsona]

If you are reporting US income on your Cdn rutenr, then, as I said, you prepare your full US return, with all deductions etc. You will then have the tax you paid in US for the year. Then whatever US income you report on your CDn income tax return, you will include the same proportion of the US tax you paid for the year.

IN your example, if you report all your income, which is 100,000 (or 125,000 CDn) It is the GROSS income that you report, not the income after deductions, then you report all the tax, $18,000.

If you report a portion of your income, you report the same portion of your tax.

But, as I have said, why are you worried about CDn tax; you are not a resident of Canada

[ofilispeaks]

Thank you. It is clear now. I appreciate your time and advice.