Hi all,
We moved to states (wife & kids) in Aug 2007, and have a choice of filing as US residents/nonresidents. I've run numbers and suprisingly getting best results with 1040NR.
a) am I doing 1040NR right ? I claimed full exemptions for wife and kids ( cannot find anywhere that it should be prorated to number of days in US ) and applied itemized deduction for CAL tax deducted.
b) 1116 gives me worst results, almost 6K more fed taxes, while 2555 is comming close to the 1040NR - any comments ?
c) on 1040, am I allowed to claim mortgage interest and property tax for ex Canadian property during 2007 ( sold when moved )?
Thanks for great forum !
Goran
1040NR vs 1040+2555 vs 1040+1116
Moderator: Mark T Serbinski CA CPA
A) you may be doing the 1040NR right. Your family are depandants, eligible for full exemption ammount. However, you are filing married filing separate, so your standard deduction, if any are smaller, and your taxrate . Your itemized deduction looks right.
B) 1116 usually is higher than 2555, Remember though that your 1040 shoudl be JOINT now, getting you the lower taxrate and the bigger standard deduction. I trust you are using software to do all this.
C)Yes.
2555 'used to' be a non-brainer in your case. But with changes made to 2555 in the past 2 years, this has raised the taxrate alarmingly.
Make sure with 1040 that you re getting the child tax credit, and that you are filing jointly. Unless you had some BIG cap gains before moving, or if you Cdn wages puts you in a real high tax bracket, then 1040 usually works better.
But, doing the case for all threee is the right thing to do.
B) 1116 usually is higher than 2555, Remember though that your 1040 shoudl be JOINT now, getting you the lower taxrate and the bigger standard deduction. I trust you are using software to do all this.
C)Yes.
2555 'used to' be a non-brainer in your case. But with changes made to 2555 in the past 2 years, this has raised the taxrate alarmingly.
Make sure with 1040 that you re getting the child tax credit, and that you are filing jointly. Unless you had some BIG cap gains before moving, or if you Cdn wages puts you in a real high tax bracket, then 1040 usually works better.
But, doing the case for all threee is the right thing to do.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Nelsona, thanks for the reply !
1040:
Just for the info: mu US income is 67.3K (FT:13.7K) and Canadian 60K/20K (should be close to this).
I did not expect I could claim morgage interest and property tax for canadian house, maybe this will offset results signifcantly.
I've read somwhere on the forum that I can deduct EI/CPP on the 1116 - If you don'm mind answering: do I just subtract it from gross income and report lower gross income or is it somwhere else ?
Yes I'm using TaxAct (free FED) for 1040 calc, and manual entry for 1040NR. Should we trust software completly ? Just found a bug in UFILE - It made decision the return is full NR return, based on true answer to question "Province of residence on Dec 31" - non-resident. It did not matter entering that I emigrated in Aug, later in the interview :)
1040NR:
You probably forgot, standard deductions are not allowed with 1040NR, but ~4K of CAL tax in itemized ded. is big help. I'm really surprised that exemptions are not prorated to number of days spent in US. It is not common to get anything free from tax offcie :) Just looking at Canadian return, every possible deduction is prorated. Maybe this is welcome gift - I'll never forget first year we landed in Canada - getting GST credit back while not working for a single day :)
For now, to me, tax treaty sounds like a bad joke. If they can add foreign income without prorating it, they should do so with foreign tax paid :)
Thanks again for your advices & opinion !
Goran
1040:
Just for the info: mu US income is 67.3K (FT:13.7K) and Canadian 60K/20K (should be close to this).
I did not expect I could claim morgage interest and property tax for canadian house, maybe this will offset results signifcantly.
I've read somwhere on the forum that I can deduct EI/CPP on the 1116 - If you don'm mind answering: do I just subtract it from gross income and report lower gross income or is it somwhere else ?
Yes I'm using TaxAct (free FED) for 1040 calc, and manual entry for 1040NR. Should we trust software completly ? Just found a bug in UFILE - It made decision the return is full NR return, based on true answer to question "Province of residence on Dec 31" - non-resident. It did not matter entering that I emigrated in Aug, later in the interview :)
1040NR:
You probably forgot, standard deductions are not allowed with 1040NR, but ~4K of CAL tax in itemized ded. is big help. I'm really surprised that exemptions are not prorated to number of days spent in US. It is not common to get anything free from tax offcie :) Just looking at Canadian return, every possible deduction is prorated. Maybe this is welcome gift - I'll never forget first year we landed in Canada - getting GST credit back while not working for a single day :)
For now, to me, tax treaty sounds like a bad joke. If they can add foreign income without prorating it, they should do so with foreign tax paid :)
Thanks again for your advices & opinion !
Goran
CPP/EI are treated as foreign tax, so you would lump this in with your fed and prov tax.
for ufile you are supposed to indicate your province on the day you left, and put a departure date. This will give you the right return.
for ufile you are supposed to indicate your province on the day you left, and put a departure date. This will give you the right return.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best