Foreign Tax Credits (TN in USA, deemed resident of Canada)

bhavinb · Post by **bhavinb** » Sun Feb 26, 2012 9:35 pm

Hi,

I was wondering if someone can help me with a problem I'm having.
I am a deemed resident in Canada and I also do NOT meet the SPT rule in the US.

When calculating my foreign tax credit, I find that it is less than the actual taxes witheld on my US income. In the CRA guide posted online, I find the following tip

"Tax Tip
Deemed Residents â€“ Your federal foreign tax credit on
non-business income may be less than the tax you paid
to a foreign country. If so, you may be able to deduct on
line 232 the amount of net foreign taxes you paid for
which you have not received a federal foreign tax credit.
This does not include certain taxes you paid, such as
those on amounts you could have deducted under a tax
treaty on line 256. For more information, see
Interpretation Bulletin IT 506, Foreign Income Taxes as a
Deduction from Income."

For example sake, suppose my US W2 shows I paid $10,000 in taxes but my CDN foregin tax credit was only $4,000, does this mean I can put $6,000 as a deduction on line 232?
I'm confused about this as Bulletin IT-506 is not an easy read....

Thanks,
-Bhavin

nelsona · Post by **nelsona** » Mon Feb 27, 2012 10:40 am

First issue is how are you a deemed resident?

Deemed resident is someone who has NO Cdn residential ties, but is BY RULE or TREATY a Cdn tax resident (Military, diplomat).

So what we need to establish is wheter you are a Cdn resident (not deemed) who just happens to be working in US, or whether you are not residnt in canada 9weither because of insufficnet ties in canada, or more tires in US).

Deemed residence is not for you.

bhavinb · Post by **bhavinb** » Tue Feb 28, 2012 12:18 am

Oh ok, maybe that would be good to clear up first.
I've moved to the US on a TN visa and have been working here since September. However, I was in Canada for over 183 days in 2011. I assumed this meant that I was a deemed resident but maybe I got my terminology wrong.

Is there another status that applies?
Does claiming an additional deduction not apply to me or is there some other way to claim the extra taxes I paid?

Thanks for any help.

bhavinb · Post by **bhavinb** » Tue Feb 28, 2012 3:22 am

Just wanted to add that although my family lives in Canada, I personally have no property, possessions or dependents in Canada...Everything came with me to the US for this job.

nelsona · Post by **nelsona** » Tue Feb 28, 2012 11:11 am

You are an Emigrant. You file a regular return BUT with a depature date. Special calcs are done and you are deemed to have sold everything you own on that day. There is a "Emigrant" guide on the CRA website. Follow it.

By "family" I'm assuming parents and siblings. They don't count as dependants, as you said.

bhavinb · Post by **bhavinb** » Mon Mar 05, 2012 4:02 pm

Thanks. I'll do that and file an emigrant return.
So what exactly is the 183 day rule for then? It sounds like I'm just ignoring it and filing as an emigrant...

nelsona · Post by **nelsona** » Mon Mar 05, 2012 5:19 pm

The 183 day rule (as it applies to Cdn taxes) is for non-residents who spend too much time in Canada

bhavinb · Post by **bhavinb** » Mon Mar 19, 2012 9:54 pm

Nelson,

Sorry, I just had one more quick question. I noticed you advised others to not claim deductions on the US return because CRA will just take that amount.

I can claim some moving expenses on my 1040 NR but I don't meet the time test. Can I just not claim my moving deductions right now and use that to my advantage on the CRA (higher foreign tax credit)?

I can then amend my US return when I pass the time test.

Thanks

nelsona · Post by **nelsona** » Mon Mar 19, 2012 10:02 pm

Amending a US return to reduce your tax, requires that you then amend your Cdn return to reduce the foreign tax you claim.

Nice try.