Husband is Canadian, no green card
Wife is Canadian, has Green Card, worked many years in US declaring full worldwide income, now only gets small US Social Security pension
Both are retired. Significant Canadian income from investments. Essentially no US income from investments, rent, etc other than wife's SS Pension
Own houses in both US and Canada. Summers in Canada, winters in US (but always < 183 days)
Bank accounts, Credit cards in both US and Canada
Wife wants to hold on to Green Card in order to get pension and Medicare to which she has fully contributed
Couple holds CDN investments jointly, declares income 50/50 in Canada. Would like to keep it this way
Probably the cleanest way of handling taxes is: split Canadian income, Wife submits US return with her half of CDN and all US income, then submits CDN return taking the credit for US taxes paid. Husband of course submits normal CDN return on his half of CDN income
But... this doesn't seem fair to Canada, because the US gets all the taxes from Canadian income from a resident that is essentially a Canadian under any fair definition.
So.... is there any way that the wife could just pay US taxes on the pension while not getting US taxes on the large Canadian income?
Any advice would be appreciated but please no moralizing.
Canadian with Green card and US pension - tax questions
Moderator: Mark T Serbinski CA CPA
If your wife lives in canada, then all her income (except SS) is considered Cdn, so the process will NOT be to pay US tax and then take credit, it will be the other way around. Pay Cdn tax, and then take credit for it on US return.
As a Cdn resident, your wife should not pay any tax on her SS in US, by treaty it is paid only in Canada (85% included only).
As it stands, the only tax in US that you and her will pay is when selling your US cottage. She will report all her income, but her Cdn tax will cover most if not all of the tax otherwise.
As a Cdn resident, your wife should not pay any tax on her SS in US, by treaty it is paid only in Canada (85% included only).
As it stands, the only tax in US that you and her will pay is when selling your US cottage. She will report all her income, but her Cdn tax will cover most if not all of the tax otherwise.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
As to keeping her GC: she will always get her SS regardkless, and Medicare is not much use to her given she has CDn coverage, so GC is not that valuable at this point.
Besides, living in canada, at some point the border will ask for her GC back.
Besides, living in canada, at some point the border will ask for her GC back.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks Nelsona for the prompt and useful replies.
The "moralizing" comment was around such things as "you should turn in the green card" or "stop trying to double dip on health care" My experience on some sites is that responders are sometimes more prepared to comment on such elements rather than try and answer the specific questions asked.
The Medicare concern is to avoid paying travel insurance (aka Snowbird insurance) for the wife since she would be covered by Medicare for such major medical emergencies that insurance is intended to cover??
Again, thanks for the feedback
The "moralizing" comment was around such things as "you should turn in the green card" or "stop trying to double dip on health care" My experience on some sites is that responders are sometimes more prepared to comment on such elements rather than try and answer the specific questions asked.
The Medicare concern is to avoid paying travel insurance (aka Snowbird insurance) for the wife since she would be covered by Medicare for such major medical emergencies that insurance is intended to cover??
Again, thanks for the feedback
I'm not clear as to how long your spouse has been living in canada, since your questions about taxation would seem to indicate that she hasn't yet filed tax retunrs in both countries, as she should be ever since moving to Canada.
Not sure how much you will be saving in snowbird insurance compared to the extra cost of doing a more complex US tax return to avoid paying any US tax (most US taxpayers living in Canada pay no US tax, but filing the return is getting more and more complicated and expensive).
Full year snowbird insurance for a couple usually runs about $700.
As I said, eventually, the border will ask: Where do you live? If it is evident that she lives in Canada (since you can't live in US, it will be obvious), they will begin the process of cancelling GC. Pretty regular occurence nowadays.
Of course, had she gotten her citizenship, this would all be taken care of.
So at some it won't be a question of choosing medicare or Provincila coverage, it will be a choice between keeping GC and medicare or giving up provincial coverage (by moving back to US). Her GC is not that much of a benefit.
in other words, don't go thru a lot of expensive hoops just to keep GC, since it isn't providing her with much added benefit.
Not sure how much you will be saving in snowbird insurance compared to the extra cost of doing a more complex US tax return to avoid paying any US tax (most US taxpayers living in Canada pay no US tax, but filing the return is getting more and more complicated and expensive).
Full year snowbird insurance for a couple usually runs about $700.
As I said, eventually, the border will ask: Where do you live? If it is evident that she lives in Canada (since you can't live in US, it will be obvious), they will begin the process of cancelling GC. Pretty regular occurence nowadays.
Of course, had she gotten her citizenship, this would all be taken care of.
So at some it won't be a question of choosing medicare or Provincila coverage, it will be a choice between keeping GC and medicare or giving up provincial coverage (by moving back to US). Her GC is not that much of a benefit.
in other words, don't go thru a lot of expensive hoops just to keep GC, since it isn't providing her with much added benefit.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Just to clarify - she is full Canadian Citizen from year dot. Worked ten years in US and stopped a couple of years ago - fully retired in both countries. Did full US and Canadian taxes during those years (Serbinski client...) Only just starting to get US pension this year. Was previously advised by IRS that, during the years of no US income there was no need to submit a US return.
No question of moving "back to the US" - Canada is clearly home. Yes the border does ask increasingly specific questions on where do you live/work and one day the green card will go.
While snowbird insurance is fairly cheap at 60 with no pre-existing issues, take a look at some of the tables for 75 year olds with issues....
But you raise some very good points that need to be digested. Thanks so much.
No question of moving "back to the US" - Canada is clearly home. Yes the border does ask increasingly specific questions on where do you live/work and one day the green card will go.
While snowbird insurance is fairly cheap at 60 with no pre-existing issues, take a look at some of the tables for 75 year olds with issues....
But you raise some very good points that need to be digested. Thanks so much.
It is absolutely FALSE that she does not need to fiel a return if hse has no US income! IRS are always giving wrong info.
US GC holders are taxed on world income by IRS, just like Cdn residents are by CRA.
Plus, there are certain Cdn investments, that require special reporting in US od there are huge fines.
Like I said, even at 75 the costs of doing US tax returns are high.
You should check with serbinski if he thinks she doesn't need to file. He will fall off his chair.
... and why on earth would hse have done fiull Cdn taxes while living in US for 10 years? Serbinski knows better than that.
US GC holders are taxed on world income by IRS, just like Cdn residents are by CRA.
Plus, there are certain Cdn investments, that require special reporting in US od there are huge fines.
Like I said, even at 75 the costs of doing US tax returns are high.
You should check with serbinski if he thinks she doesn't need to file. He will fall off his chair.
... and why on earth would hse have done fiull Cdn taxes while living in US for 10 years? Serbinski knows better than that.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Just to elaborate on the "advice" you got from IRS:
The stipulation is that YOU, as the spouse of a US taxpayer, do not have to file a tax return if you don';t have US income. But your spouse certainly does -- every year, unless she has less than ~$5000 world wide income (not just US).
I hope you are not in a mess....
The stipulation is that YOU, as the spouse of a US taxpayer, do not have to file a tax return if you don';t have US income. But your spouse certainly does -- every year, unless she has less than ~$5000 world wide income (not just US).
I hope you are not in a mess....
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
And while we are talking Medicare.
I'm not sure what info your wife has about Medicare, but no one who has other options relies on Medicare aspecially the free part taht your wife would be paossibly availing herself of.
There are several "parts" to medicare, some of which need to be elected and paid for -- which your wife would be crazy to pay for -- and most retirees would never stop paying for their expensive retiree medical insuarnce and relying solely on Medicare.
I'm not sure what info your wife has about Medicare, but no one who has other options relies on Medicare aspecially the free part taht your wife would be paossibly availing herself of.
There are several "parts" to medicare, some of which need to be elected and paid for -- which your wife would be crazy to pay for -- and most retirees would never stop paying for their expensive retiree medical insuarnce and relying solely on Medicare.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
high cost ?why?
Hi all, could you elaborate why is "cost of doing a US return is high"? It is probably depends on a particular case. For example, we plan to return to Canada and will be required to do US returns. In our case it will be SS and 401 income. Either we use a tax software or just do paper returns (that we do now) there is not much cost associated with this. Just paying for mailing the tax return to IRS and reporting our accounts on TD F90 forms (one more envelope). Of course, there will be many form to fill in. But if you know how to do this, it just takes time. That's all. Am I missing something?
Serge
Serge. First off don't do a manual return - ever. Invest the $19 in software.
Second, once you return to canada, almosy every financila endevour you undertaje will require special reporting to IRS that you don;t have when doing the same thing while in US. RRSP, RESP, TFSA, mutual funds, bank accounts ALL require extra reporting, never mind determining the tax credits needed to reduce your US tax to zero.
Second, once you return to canada, almosy every financila endevour you undertaje will require special reporting to IRS that you don;t have when doing the same thing while in US. RRSP, RESP, TFSA, mutual funds, bank accounts ALL require extra reporting, never mind determining the tax credits needed to reduce your US tax to zero.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
back to canada
Nelsona. Thank you for explanation. Agree, there will be a headache with all this tax reporting. But what can we do? Stay in US? Having friends and children in Canada probably overweighs the tax inconveniences. Of course, it is cold there. But hearing these stories about people getting divorced to avoid total bankruptcy if a serious illness hits in US makes us thinking that Canada is still better.
I will try to use software this year. Always assumed (probably wrongly) that US tax software dis not cover all the forms for reporting Canadian part.
Is 8938 included in the tax software?
I will try to use software this year. Always assumed (probably wrongly) that US tax software dis not cover all the forms for reporting Canadian part.
Is 8938 included in the tax software?
Serge
This post was about someone who DID have a choice.
Check with the software firms. Even if one form is missing, you should not do 1116, for example, by hand. Nor should you do 2555 (and the resulting tax calculation) by hand. You can always submit the missing paper form later (we did this for years with 8891 until it was added).
Check with the software firms. Even if one form is missing, you should not do 1116, for example, by hand. Nor should you do 2555 (and the resulting tax calculation) by hand. You can always submit the missing paper form later (we did this for years with 8891 until it was added).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing