us cit married to canadian with gc with ca rental and us inc

[golfndad]

i am married to canadian wife who has rental income in canada and other income in us. i have other rental income in us and other income in us..none in canada.

how do we file in both countries?...do we need to report canadian rental on us joint return and canadian?

if we need to report rental income on us return can we file individually if beneficial?

thanks fo any help here

[nelsona]

If your spouse is now living in US, she should be considered non-resident for tax purposes, and thus should be filing a special '216' tax return in Canada reporting only her Cdn rental income, and having tax withheld from the rent every month and submitted to CRA. It is very iomportant that she meet all the requirements of a 'departing' Cdn resident to avoid future problems. See the emigrant guide on the CRA website.

For US, you should both be reporting all world income on your 1040, including the Cdn rental income (like any other rental income, with income and expenses). Any Cdn tax she pays on that rent (as determined on the 216 return) can be used as a credit on your 1040 using form 1116.

[golfndad]

thank you..to clarify..canadian spouse lives 6 months in us 6 months in canada so is not emigrating.

yo we need to file joint us retrun and include canadian rental income on us 1040 sched e and report only her rental income on canadian form 216?

[nelsona]

I use "emigrating" as a tax term.

Since she lives with you in US, and apparently you don't live with her in Canada, then she is a US tax resident, by treaty and by definition.

She first needs to establish that she no longer is a tax resident in canada, then she can file a 216. Otherwise, she will still be considewred Cdn resdidnet and mst report her world income to canada and pay Cdn tax on it.

[nelsona]

... and before she asks, yes, she can maintain her provincial health card even if she is considered non-resident of canada.

[golfndad]

spouse is permanent us resident and she resides in part of the rental property during the 6 months she resides in canada.

her understabding is that she is considered a resident for tax purposes of both countries..is this not true?

[nelsona]

Not really. She considers herself dual resident. But the treaty would probably make her a "deemed non-resident" of canada -- which is the same as non-resident

In any event, if she chooses, for some reason to be a Cdn tax resident, she needs to report all her income in canada, and take some creit for the US tax she pays on her US income.

As a GC holder she needs to report all her income everywhere on 1040, with you, and take credit for the Cdn tax she pays on her rental income.

Simply put, she is probably living in canada six month simply to keep her provincial healthcare (or can she only put up with you for six months at a time ;0)). Chances are that she has either lost her healthcare coverage doing what she is doing, or, more likely, she still qualifies by doing what she is doing even if she also declares herself (or the government declares her) non-resident. many OHIP holders spend more than six months a year in US, without GC, and are considered both non-residents and OHIP-quilfied. her having a GC should make this a slamdunk.

So, she should clarify her tax status either way to avoid any uncertainty and any nasty surprises down the road (for example on the cpital gains tax on her property -- or on property she know owns with you in US).

[nelsona]

Just for technical clarity, when a person has residential ties in both countries, the treaty looks at of a 'centre of vital interests', which in her situation, is basically where YOU are. this 'tie-breaker' would make her US tax resident.