Moved from US to Canada in 2021 - claiming foreign tax credit?

[maple.taoist]

Hi everyone! My family moved from US to Canada mid 2021 and became Canadian tax resident. I finished our US tax returns for 2021 (form 1040) already, but am confused when trying to start with the Canadian part. Would appreciate much if anyone could help with these questions below - I am really clueless with them!

1) In principle, CRA says I need to report US income since I became a tax resident of Canada, and I need to calculate the US taxes paid on this portion of income as foreign tax credit. However, I'm not sure where to put the IRS standard deduction to - I'm thinking from a marginal tax rate perspective of view. That is to say, figuring out my marginal tax rate from US and those are my taxes paid to US. Am I wrong fundamentally and should change to a linear calculation (percentage based)?
2) pre-tax deductions. I have self-contributed 401K, employer-matched 401k, and pre-tax deduction for health insurance premiums. I think that self-contributed 401k is tax-exempt, but how about employer-matched 401k and pre-tax deduction for health insurance premiums? Do I need to add those back to my income when claiming US income?
3) distribution of figures between my SO and self. Our 1040 is filed jointly but for the Canadian part, I'm confused. Can someone enlighten me the basic principles here?
4) declare all income. I saw somewhere that as a new-comer to Canada, I need to "declare" all-year income but only the portion since I became a Canadian tax resident is taxable. Is there a specific place on the tax form to "declare" all-year income?

Huge thanks for anyone who helps! I'm quite new to Canadian taxation even though filing my US taxes only took me around 2 hours...

[maple.taoist]

Forgot to ask about US state taxes. Can I claim the taxes that I paid to US states as foreign tax credit as well?

[nelsona]

Did you work after moving? On your Cdn return You only need to report income earned after your move to Canada.

Just to clarify, if you need to use a tax from one country as a credit, it is determined after all deductions are made, and is then prorated for the incoem you are reporting in the other country.

[maple.taoist]

Thank you for the response! I continued to work for my US employer remotely for a couple of more months after moving then resigned. So for proration, does it mean
foreign tax credit = all-year taxes paid to US * [ (US-taxed income reportable to Cdn, aka earned after moving to Cdn) / (all-year US income) ]
?

[nelsona]

So what I said about prorating the taxes vs. the income still applies. prepare bothe returns completely without FTC, and then determine what portion of those taxes go to what income.

Too late in the tax season for me to give more specifics. Complicated issues should be looked at starting in January.

[maple.taoist]

I'll give myself a few more days to work on it and it's very likely that CRA will ask questions...However IRS approved my taxes just last weekend so I could not start until then as I have no idea how Cdn taxes work.
From what I understand now, I need to list my US-sourced income's Cdn reportable portion, and allocate paid US taxes with a linear pro-rata formula. Then I may take the minimum of Cdn taxes otherwise payable and the paid US taxes as my credit in my Cdn tax return, though I assume the software (using WS) would do much of it itself after I put my foreign income and foreign taxes paid...

[nelsona]

For the future, you do not need to wait for one tax to be "accepted" (that means nothing for IRS) to do the others.
In fact you should never submit one tax until they are both ready, as you need both to be able to determine the tax on both before you can add FTC .

then you send them in.

How did you claim FTC on your US return, since you had to include all Cdn income you earned during the year on your 1040?

Had to begin looking at this LONG time ago.

[maple.taoist]

Hi nelsona, I only had CAD 300 Canadian sourced income in 2021 and did not put any FTC on my US returns - I just put the 300CAD as 230sth USD as similar as other 1099-INT there...
You helped a lot and I think I know where to head to next for my Cdn returns.
1) split my US taxable income to Cdn non-taxable (before moving to Canada) and Cdn taxable (after moving to Canada) based on pay slips/bank statements, etc
2) determine the taxes paid for the US taxable income above, and do a similar split using pro-rata rules
3) do the two steps above again for US state taxes
4) Check my US income that are not taxable in US but should be taxed in Canada (such as pre-tax deduction for 401K and health insurance premium? I haven't done the research yet)
5) Do a manual calculation of applicable FTC
6) put the information from 1-4 to the software and see if the results match 5)

Can I know if basic personal (13808 per person but needs to be prorated as I'm part year resident) can stack with FTC to reduce my taxes payable to CRA?

Hopefully this sounds correct!

[maple.taoist]

I reached to the point where I need to calculate
FTP(NBIT)

Just making up an example:
W2 100,000, two people combined
IRS standard deduction 25,000
taxable wage = 100,000 - 25,000 = 75000
taxes paid to IRS based on the 75,000 = 19,900 * 12% + (75,000 - 19,900) * 22% = 14510
assume that the 60,000 of the wage is earned before moving to Canada, and that the couple moved to Canada 8/1/2021 (153 days in Canada out of 365 of 2021)

So, does FTP(NBIT) calculated as (100,000 - 60,000) / (100,000) * (14510) = 5804 ?
(Cdn reportable portion of income / total income reported to the foreign jurisdiction) * (total taxes paid to the foreign jurisdiction)

[maple.taoist]

One more - After some googling, I think my 401k contribution and employer match may not be tax deductible in Canada since I did not have any Canadian tax returns filing for 2020 and thus, I have no RRSP contribution limit. That means I don't have any room to deduct such income from my Canadian returns I guess...

[maple.taoist]

@nelsona would you please help :tears

[nelsona]

Sorry, read my signature.

April 12th is WAY TOO LATE to come here for help.

[maple.taoist]

Thanks nelson. I'll follow the general idea and submit to CRA for their nevertheless unavoidable scrutiny for FTC:)