For the past few years, attempting to use Article XXV has not benefited me as a commuter, mostly due to my husband's childcare costs deduction ($14k) from income in Canada but not in the US.
However, my husband's job just got relocated to the US. He currently only commutes 2 days a week with the rest of his time in Canada (Windsor) but he is on US payroll.
We do not want to move to the US but I'm wondering what the tax implications will be with us both working in the US & commuting from Canada? Will Article XXV be more likely to benefit us now?
If anyone has any experience with this, I'd greatly appreciate hearing your feedback.
From a one commuter to a two commuter household
Moderator: Mark T Serbinski CA CPA
Assuming his income and expenses don't change, it is unlikley that XXV would help him, since your joint 1040 for determining US tax rate will not drastically change.
Since his Cdn deductions were helping him and not you already, XXV shouldn't help him now.
I'm a little confused why you say a deduction HE had was impacting YOUR Cdn taxrate (?), since the goal of XXV is to lower YOUR US rate below YOUR Cdn taxrate. You are not filing jointly in Canada. Could you breifly expalin, just to make it clear to me?
Then, the question becomes how is he being paid for his time in canada, which should be considered Cdn-sourced.
He will have to file a 1040NR to report the US-sourced income (the 2 days per week) only, and should not have to report the Cdn-sourced income, nor should he be subject to FICA for that income. His W-2 should reflect this. he should be getting a W-2 and a T-4 under this arrangment.
Once that is done, it may then be useful for him to get the US rate as low as possible, since he will suffer from the marginal vs. effective issue of foreign tax credits.
Since his Cdn deductions were helping him and not you already, XXV shouldn't help him now.
I'm a little confused why you say a deduction HE had was impacting YOUR Cdn taxrate (?), since the goal of XXV is to lower YOUR US rate below YOUR Cdn taxrate. You are not filing jointly in Canada. Could you breifly expalin, just to make it clear to me?
Then, the question becomes how is he being paid for his time in canada, which should be considered Cdn-sourced.
He will have to file a 1040NR to report the US-sourced income (the 2 days per week) only, and should not have to report the Cdn-sourced income, nor should he be subject to FICA for that income. His W-2 should reflect this. he should be getting a W-2 and a T-4 under this arrangment.
Once that is done, it may then be useful for him to get the US rate as low as possible, since he will suffer from the marginal vs. effective issue of foreign tax credits.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Thanks nelsona.
His did get a 15% raise with the move + of course, the exchange rate. His W-2 will be for his full salary. I don't think he wants to stir the pot here as he prefers to work out of Windsor but the company is slowly transitioning all it's employees over to the US. I do not think they will be providing both a W2 & T4 except for this year (1st half T4, 2nd half W2).
My US taxrate was higher using XXV than filing 1040NR because I had to include our combined income. My husband's tax rate in Canada was lowered because of the $14k deduction in income for child care expenses (this reduction did not translate when I included his income and subtracted his taxes paid on my US pro forma). Does this make more sense?
His did get a 15% raise with the move + of course, the exchange rate. His W-2 will be for his full salary. I don't think he wants to stir the pot here as he prefers to work out of Windsor but the company is slowly transitioning all it's employees over to the US. I do not think they will be providing both a W2 & T4 except for this year (1st half T4, 2nd half W2).
My US taxrate was higher using XXV than filing 1040NR because I had to include our combined income. My husband's tax rate in Canada was lowered because of the $14k deduction in income for child care expenses (this reduction did not translate when I included his income and subtracted his taxes paid on my US pro forma). Does this make more sense?
So, like I said, this year, with the 50/50 split, he will probably benefit from using the XXV, since he will not be able to use up the US tax as credit due to effective vs. marginal issue.
And -- if he decides to slide the W-2 thing slide -- in future years, he will probably benefit, since he stil won't be getting the childcare deduction, his US taxrate may be higher than Cdn.
Obviously, you'll run XXV for this year and see, and again next year. If it doesn't pan out you'll know for future at that point. It's really designed for the one income family.
I assume when you said "subtracted his taxes paid on my US pro forma", you meant as a scedule A deduction of his current withholding minus his refund from previous year or plus his tax-time payment. makes sense.
And -- if he decides to slide the W-2 thing slide -- in future years, he will probably benefit, since he stil won't be getting the childcare deduction, his US taxrate may be higher than Cdn.
Obviously, you'll run XXV for this year and see, and again next year. If it doesn't pan out you'll know for future at that point. It's really designed for the one income family.
I assume when you said "subtracted his taxes paid on my US pro forma", you meant as a scedule A deduction of his current withholding minus his refund from previous year or plus his tax-time payment. makes sense.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing