Income Tax Filing For Dual Status Year

[taxconfused1]

Hello,

I have reviewed this forum which is an excellent resource, and want to confirm that I have some things right for my US tax filing.

I moved to the US in Fall 2022. I understand that to file my US taxes, I have three options: filing a full year 1040 return, filling a full year 1040NR return or filing a dual status return. I also understand that filing the dual status return is usually not ideal.

I am wondering, for the full year 1040, does that mean that the gains in my TFSA and RRSP would be subject to US taxes from the beginning of 2022? Also, I have a personal residence that I converted to a rental in Canada. Would the US step up basis for the FMV if I sell be based on the FMV at the beginning of 2022 or the FMV when I moved?

Similarly, if I do a full year 1040NR, does that mean that the gains in my TFSA and RRSP would be subject to US taxes only from the beginning of 2023? Also, what about my personal residence turned rental? What date would be used for the fair market value?

If I am doing the 1040NR, I wouldn't include the income I earned in Canada from the first part of the year, correct? But I would include the rental income from Canada for the latter part of 2022?

Thanks in advance!

[nelsona]

If you file a full year 1040NR, ONLY US-sourced income will be reported on it. No Cdn wages, no rental income, etc. This would not change your Cdn departure date.

You would not report any TFSA income from 2022. Your basis for future RRSP income at withdrawal would be Jan 1 2023. You have 3 years from the time you rented your Cdn home to sell it tax free in US. That date would be when you would want to establish FMV, for depreciation as well.

You do not get any standard deduction on 1040NR.

If you file full year 1040, you report world income for 2022, but you get all the deductions, credits, etc that any ither US taxpayer is eligible for, including foreign earned income exclusion, foreign tax credit etc. No change to your CDn departure date.

You would need to report any TFSA income for 2022, and your basis for future RRSP taxation would be determined on Jan 1 2022, No difference for your future sale of your Cdn home. Your rental income and wages would also be taxable, with credit given for Cdn tax.

I trust you have set up your CDn rental income withholding, etc for Cdn tax purposes.

I always suggest doing your taxes BOTH ways, and see how much US TAX you pay each way, and choose the lower one.

The only time I would suggest dual status over 1040NR, is if there is ambiguity about your Cdn tax residency. But since you are enting your past home, and have moved, that is not an issue here, I don't believe.