I was just curious as to how the new Family Tax Cut in Canada would affect a USC as the recipient of the transfer?
My Wife is a US Citizen and PR of Canada, I am a Canadian Citizen only, we both live and work in Canada, we have two dual citizen children under 18 years of age..
All of my income for 2014 is general wages from Canada: $115,000
My wife has:
-general wage income from Canada: $22,000
-universal child care benefit: $2400
-some Canadian bank interest: $40
-some self employment income: $3500 which will likely be wiped out due to deductions and business start up expenses
-US interest paid from the IRS (1099-INT): $48, which a part of it will need to be resourced by treaty to zero out the US tax owing on it, after we file the CRA return.
With me as the higher income earner, I believe that I will be able to transfer taxable income to my wife....
1. Is there any special treatment for this with regards to the IRS return?
2. Is this something worth pursuing? - it would potentially provide a tax credit capped at $2000, but I don't want to further complicate her IRS return..
Family Tax Cut: NRA spouse transferring to USC spouse
Moderator: Mark T Serbinski CA CPA
I answered this on a thread in the past 2 days. Please read and see if it answers your question.
You are not transferring income (unlike pension splittong) you are getting a DEDUCTION based on less taxes paid if you even out your incomes, That deductions lowers EITHER of your Cdn taxes.
You are not transferring income (unlike pension splittong) you are getting a DEDUCTION based on less taxes paid if you even out your incomes, That deductions lowers EITHER of your Cdn taxes.
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
Thanks for the heads up on that other thread, I did read through it and it looks like that persons situation is the opposite of mine and my wife's.
It appears that he is a US Citizen commuter with a higher income than his non US Citizen spouse. For him to transfer income to his spouse as well as taking the deduction and the credit, could potentially create a scenario where he lowers his Canadian tax to the point where he may not have enough for foreign tax credits against his US income
My scenario puts me, the non US Citizen with the higher income transferring to my wife, the US Citizen with lower income. Because of my higher tax bracket I would take the deduction and credit and overall benefit.
What I gather from all of this:
A US Citizen with higher income than their non US Citizen spouse might want to look carefully at the transfer. If they chose to do so, and they (the USC) also take the deduction and credit, depending on their type of income it could create a situation where they lower their Canadian tax to the point where they may not have enough for FTC against their IRS return..
A non US Citizen with higher income than their US Citizen spouse, who transfers income (to their USC spouse) and also takes the deduction and credit is a better scenario I think. The lower income US Citizen spouse still keeps their Canadian tax intact so to speak and therefore the FTC to be used against their US tax is not affected, and the non USC gets the benefit against their Canadian tax. No risk to US Citizen in this scenario.
It appears that he is a US Citizen commuter with a higher income than his non US Citizen spouse. For him to transfer income to his spouse as well as taking the deduction and the credit, could potentially create a scenario where he lowers his Canadian tax to the point where he may not have enough for foreign tax credits against his US income
My scenario puts me, the non US Citizen with the higher income transferring to my wife, the US Citizen with lower income. Because of my higher tax bracket I would take the deduction and credit and overall benefit.
What I gather from all of this:
A US Citizen with higher income than their non US Citizen spouse might want to look carefully at the transfer. If they chose to do so, and they (the USC) also take the deduction and credit, depending on their type of income it could create a situation where they lower their Canadian tax to the point where they may not have enough for FTC against their IRS return..
A non US Citizen with higher income than their US Citizen spouse, who transfers income (to their USC spouse) and also takes the deduction and credit is a better scenario I think. The lower income US Citizen spouse still keeps their Canadian tax intact so to speak and therefore the FTC to be used against their US tax is not affected, and the non USC gets the benefit against their Canadian tax. No risk to US Citizen in this scenario.
I think you missed the point, so I'll be more blunt.
The tax credit IS THE SAME regardless of who claims it. So it isn't a case of which spouse makes more money. The credit is calculated by the couple, and then eiother one can choose to use it.
IT IS NOT A TRANSFER OF INCOME.
The important thing is that the non-USC takes the credit (if they have sufficient taxes to pay).
The tax credit IS THE SAME regardless of who claims it. So it isn't a case of which spouse makes more money. The credit is calculated by the couple, and then eiother one can choose to use it.
IT IS NOT A TRANSFER OF INCOME.
The important thing is that the non-USC takes the credit (if they have sufficient taxes to pay).
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