How to Claim Foreign Tax Credit (Form 1116)

[crossborderguy]

Hello,

I am a Canadian non-resident who had employment income from a Canadian company. I am currently a resident of the USA.
I plan to file the "income tax package for the province or territory where you earn the income along with Guide T4058, Non-Residents and Income Tax".
On my (non-resident) T1 my Federal tuition tax credit was claimed to to reduce my tax owed.

I was wondering for IRS Form 1116 PART II; should the foreign taxes paid be the Net Federal Tax (ie. T1 Line 40600) or Federal tax on Taxable Income (ie. T1 Line 75)?

I'm wondering if it is expected to both lose credit (to CRA) and pay tax (IRS) for the same foreign income in this scenario.

Any help would be appreciated. Thanks!

[nelsona]

It is the net tax, line 42000 PLUS any EI and CPP contributions you made.

And yes, you must "waste" tuition tax credits on the CDn return while resident of US, which results in a reduction of the foreign tax credit in US, as your Cdn tax is reduced.

The same applies when a Cdn resident has tuition credits and works in US while being Cdn resident: the tuition credits are used first before any foreign tax credits.

Known issue.

[crossborderguy]

Thanks for your response, that is super helpful!

I was also wondering if you knew which tax forms I should file with the CRA. Depending on the link on the Canada.ca I've seen;
Option #1: Submit a T1 for the province you were employed + non-resident T1 (https://www.canada.ca/en/revenue-agency ... l#flngrtrn)

Follow up Question: If I were to submit both a nonresident and provincial resident T1, they would output different amounts to be refunded/paid, which should I follow?

Follow up Question: Should I be completing Form T2203 to determine provincial and federal surtax for the non-Resident T1?

Option #2: Only submit the T1 for the province you were employed (https://www.canada.ca/en/revenue-agency ... #P117_9265)

Follow up Question: If I only submitted the T1 based on the province where I was employed, would I only report Canadian sourced income? How would the Canadian government know that I'm not a Canadian resident?

[nelsona]

The forms you file are based on what type(s) of Cdn income you report.
Follow those instructions (better yet, use software) and you will be fine.

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