Confused on 1116, 2555 and RRSP contribution

[dowager]

This is my first year in US. I had Canadian income in the first three months of the year. When I report foreign income, do I deduct RRSP contribution I made? If not, where do I show this RRSP contribution?

I applied 2555 which turned out to exclude about 50% of my Canadian income. Can I also claim foreign tax credit? When I did that, TurboTax seems to calculate a fraction of that and it shows up as a deduction? How do I make it a credit, as I am told that is better. Can we claim both foreign income exclusion AND a foreign tax credit?

I read the many postings on 1116 and 2555, but is still confused. Thanks for the help Nelson.

[nelsona]

Unless your RRSP deduction was made thru your employer, it is not deductible. If it was made thru employer, you take it off your wage amount directly before entering it.

Remeber that 2555 is only for your wages. For 3 months, it should allow you to exclude about 20K. Any more than that can indeed be handled on foreign tax credit, along with all other Cdn income.

I might suggest, thta since all your ages do not appearto be excludable, that a dual-status return might work out better for you. It should at least be looked at. 1116 generally doesn't give great results when one has sizable income in both countries, as you appear to.

[dowager]

Thanks for the quick response. My income for the year was about $140K, of which $30K was from Canada. So about $17K was excluded. If I do not file full year 1040, I think the taxes will be way higher as I would not be allowed deductions, I have a non working spouse and 2 kids. What do you think?

Thanks for the help.

[nelsona]

Your non-Cdn income should not impact your FEIE, which is strictly based on pro-rating your days before moving to US over the 87000 FEIE limit, so you sais 3 months in canada which should llow you to exclude about $22K.

The rest can be worked into your 1116s, which you will use on other Cdn income/tax anyways. You should not use the tax as a deduction.

The use of dula-status was merely a suggestion. From the situation you now describe, full year 1040 MFJ would still be best.

[dowager]

I really appreciate your assist on this. And thankfully you are helping so many of us navigate the world of cross border taxes. I found a lot of gem in your site. I wanted to say thank you, and keep up the good work. You are doing a great service to all of us. Thanks!