How to Source Investment Income

Darb · Post by **Darb** » Thu May 28, 2009 3:32 pm

Hi,

I'm a US resident that became a permanent resident of Canada in May and reside in Canada full time.

1) When I file my taxes next year I will have investment income (Cap gains, dividends, bond and bank interest) from investments that are registered and domiciled in the US. I know I have to file in both countries but I am confused about whether this investment income is considered US Sourced or Canadian sourced because I now live here. Can you clarify this.

2) If it is all US sourced income then do I just fill our my US 1040 like always and then get a tax credit from Canada for the tax I had to pay to the US. Or do I pay Canada the tax on this income even though it is from the US and then get a credit from the US?

Thank you.

Darb · Post by **Darb** » Thu May 28, 2009 5:21 pm

I meant I am a US citizen and Canadian Perm Resident.

Thx

nelsona · Post by **nelsona** » Thu Jun 04, 2009 1:08 pm

Interest and dividends are sourced were the payOR resides, so US bank interest and dividends from US-based companies is US-sourced.

Cap gains are source by where the payEE (you) reside, except for (in simple terms) real estate and resources.

Just to make you life complicated, Canada does not give any credit for US tax on bank interest, and gives only up to 15% credit on dividends. Any excess from these two maximums needs to be claimed on your US return.