I'm a Cdn resident and US citizen. After spending time trying to do my taxes using foreign tax credits (1116), I just tried it with the Earned Income Income Exemption (2555). To my surprise, using the 2555 yielded $0 in US tax owing without any FTCs at all! (Actually, the IRS appears to owe me $300 for "stimulus".)
So here are my questions:
1) Given that I don't owe any US tax, I assume that I will have $0 FTCs on my Canadian return (even on US-sourced dividends), right?
2) Is there any reason or advantage to filing any 1116's with my US return? They would show tax paid on foreign income but none would be needed. Perhaps to provide benefit in future years?
Thank you!
FEIE (2555) or FTC (1116)
Moderator: Mark T Serbinski CA CPA
The only thing you have to watch is the following:
Once you use 2555 for wages for one or more tax years, and then switch to 1116 in some year, you can't go back to 2555 for, I believe 5 years.
If you have kids, and earn little or no US-sourced income, using 2555 can sometimes prevent getting the child tax credit.
I'll trust you are using software to come to your conclusions.
Once you use 2555 for wages for one or more tax years, and then switch to 1116 in some year, you can't go back to 2555 for, I believe 5 years.
If you have kids, and earn little or no US-sourced income, using 2555 can sometimes prevent getting the child tax credit.
I'll trust you are using software to come to your conclusions.
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