I'm a USC working in Quebec for the past 4 years. Each year I pay US taxes for my US mutual fund dividends. In reading this forum, I've seen several references to resourcing the US income to Canada in order to reduce the US payments, but I am unable to understand how this works.
I've looked at the "Additional Foreign Tax Credit on U.S. Income" worksheet at the back of Pub. 514 (Foreign Tax Credit for Individuals), but am unable to understand that either (why can't they give nice examples like in the rest of the publication?)
Could someone please give me, or point me to a clear explanation of this?
Thank you for your help
Please explain re-sourcing US-sourced income
Moderator: Mark T Serbinski CA CPA
You only need to re-source US income if you cannot get full credit on your Cdn return for the US tax you pay. This would only happen if your US average tax rate is greater than 15%.
So, I'm quite sure that you do not need this info.
If you do, give me some numbers.
So, I'm quite sure that you do not need this info.
If you do, give me some numbers.
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
Yes, I believe that you are correct. According to my TurboTax summary, my effective tax rate was 10.82%. My tax bill was $4,147. to the USA and $536. to my state.
This is the procedure that I am following for doing my taxes. Not sure if it's right or not:
1. Complete the Canada/Quebec taxes without listing any foreign taxes paid to the USA (this seems like a chicken-and-egg problem: each country wants to know what taxes I paid to the other).
2. After I received the CAD and QC notices of assessment, I filed my USA and state taxes. I was able to give the exact foreign tax info that I paid to CAD/QC.
3. Now that the USA federal and state returns have been processed, I am going to file Adjustment Requests to Canada and QC for foreign taxes paid (Schedule 1, line 405 for CAD, and the equivalent for QC). Hopefully they will refund (some? all?) of the taxes I paid to the USA federal and state.
Does this seem right to you?
Thank you very much for your help.
This is the procedure that I am following for doing my taxes. Not sure if it's right or not:
1. Complete the Canada/Quebec taxes without listing any foreign taxes paid to the USA (this seems like a chicken-and-egg problem: each country wants to know what taxes I paid to the other).
2. After I received the CAD and QC notices of assessment, I filed my USA and state taxes. I was able to give the exact foreign tax info that I paid to CAD/QC.
3. Now that the USA federal and state returns have been processed, I am going to file Adjustment Requests to Canada and QC for foreign taxes paid (Schedule 1, line 405 for CAD, and the equivalent for QC). Hopefully they will refund (some? all?) of the taxes I paid to the USA federal and state.
Does this seem right to you?
Thank you very much for your help.
There was no need to wait to file all returns at same time. Why would you have state tax if you live in QC? $4100 seems an awful lot to pay to US, since you would only be paying tax on dividends. all other tax/income would be considerd Cdn -source and thus end up with no tax in US.
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
I have (taxable) retirement income from the USA, as well as a fair amount of dividends and capital gains. Also, if I understand correctly, in Form 2555 I can only exclude $92,900 of my Canadian income. The remaining amount gets taxed by the USA. This is why I owed so much to the USA.
I still maintain a home in the USA, which is why I think I have to pay state taxes as well.
I still maintain a home in the USA, which is why I think I have to pay state taxes as well.
cap gains should not result taxable in US if you live in canada. they are considered Cdn-sourced, so normal foreign tax credit would apply
Your home in US is outweighed by your residnce in QC. You are not liable for state taxes. If you were, you would need to include ALL your income on that return as well including qc income. You would only be liable for rental income in your state.
As to your wages, what is above the exclusion amount, is then eligible for foreign tax credit.
Your home in US is outweighed by your residnce in QC. You are not liable for state taxes. If you were, you would need to include ALL your income on that return as well including qc income. You would only be liable for rental income in your state.
As to your wages, what is above the exclusion amount, is then eligible for foreign tax credit.
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
Sorry, I didn't mean to confuse things. My original question was about trying to understand how resourcing of US dividend income works. I've read about it on several posts on this site, and wanted to know how it works, and whether or not I could use it.
It seems that there are quite a number of other things that I don't understand as well.
It seems that there are quite a number of other things that I don't understand as well.