401 contribution & deduction in Canada

[frank2012]

Hi, I have a question about 401k contribution and deduction in Canada. I commute to work in USA for a US company.

Let's say, I made a contribution of $10,000 to my employer's 401k plan in 2012. My RRSP deduction limit is $12,000. I understand that I can deduct $10,000 on T1 Line 207.

After some calculation, I found that I only needed $5,000 deduction on Line 207 to bring down my tax to Canada to zero.

My question, can I state my 401k contribution is only $5,000 on Line 1 of RC268? I want to save my RRSP deduction limit for the future.

This also brings up another question, if my foreign tax credit is more than my tax to Canada, can it be used for the future years?

Thanks a lot!

[nelsona]

You cannot reduce your 401(k) contribution amount, as, besides determining your RRSP deduction, it is also used to determine your future contribution room.

It is very unusual for your Cdn tax to be lower than your US, do you have some unusual Cdn deuction? Or are you perhaps not correctly filing your US taxes such that you are overpaying inUS?

You should be using software, and being more aggressive in determining your US tax, perhaps by filing a 1040, or, if married, an XXV(2) return.

Your foreign tax can only be used in that year, no carry forward and, unless you have no Cdn income, the foreign tax credit cannot reduce your Cdn tax to zero

There is something amiss in your example.

[frank2012]

Thanks, I will take a closer look!