Tax paid on RRSP at time of distribution

[pdfc]

I paid tax on the distribution from an RRSP to Canada. Where on the 1040 do I enter the tax paid? I am a US citizen living in Canada.

[nelsona]

Either on schedule A or on form 1116, as a credit against the US tax on your RRSP, which is anything over the contributions.

And the Cdn tax is NOT what was withheld, it is the percentage of overall tax you pais on all your income prorated by your RRSP withdrawl. The withheld tax was simply an estimate while waiting to do your tax return.

[BillS]

So the tax credit can ONLY be applied against the gain associated with an RRSP distribution, but not the contributions, correct ?

In TurboTax for the RRSPs when I fill out the 8891 forms line 7a showing distributions for each RRSP account, and that no tax was paid (cost basis much higher than market value) on line 7b, it populates into 1040 line 16a, and line 16b (taxable distributions). After then filling out form 1116 for foreign tax credit, I suddenly see a very substantial refund. I must be doing something incorrect on the 1116.

[nelsona]

Your 1116 foreign income can only be 16b, not 16a. The term "gross foreign income" here does not means the gross amount of your RRSP/LIRA withdrawl, it means the portion of your foreign income that contributed to your AGI (adjusted gross income). That is 16b. Many people make this error.

Bill, I think you also may be misunderstanding what line 7(b) is on 8891 is. so here is an example

For Lira the taxable 7b portion of 7a is 100%. It doesn't matter how much you 'lost' since coming to US, you have no cost basis.
For an RRSP, It can be some number between 7a and 0. These figures will go on your 1040 on 16a and 16b.

Regardless of what is on 7b (or 16b), you DID pay Cdn tax. This figure goes on the 1116.

[pdfc]

I had no other income during the year , only a $5000 distribution from my RRSP. My personal deductions were such that i got back what was withheld at time of distribution. When my Canadian income tax was done I received a refund. How do I show this on the 1040? I also show no other income on my 1040 as there wasn't any.

[nelsona]

$5000 is still income. So, you need to file an 8891 to report existence of RRSP, and you need to report the distribution on it, and on 16 a and 16b. Since there was no Cdn tax paid, there is nothing to claim in US return.

besides you owe no tax in US either. But you should file a return to file 8891.

[pdfc]

Thanks so much. I have done the 8891 and put the 5000 in 16a & 16b.