can a dual resident avoid dual taxation?

RichardS · Post by **RichardS** » Tue Apr 07, 2015 3:30 pm

My 68 year-old wife is a Canadian citizen who was born in Vancouver, Canada and has lived there all her life. She owns a home there, has worked as a school teacher in Vancouver for her entire working career, has a Canadian bank account, and her car is registered in British Colombia. I was born in the USA and have lived there all my life. Currently my wife and I spend 5 months of the year in Canada at her home and 6 months in the USA at my home in Connecticut. She and I were married on December 7, 2013. She obtained a US green card on July 14, 2014, and began receiving US social security payments on January 1, 2015. She now has Part A Medicare and will receive Part B on July 1, 2015. So my wife is a dual resident of the USA and Canada with definite ties to Canada but also a clear indication that she intends to make use of her USA residency. We want to continue that status so that she has US health care and can go to the USA without fear of being denied entry. She has already filed her Canadian tax return for 2014. She is retired; all of her income is from Canadian investments. We know that she has to file a US return also, but she cannot file a 1040NR return without losing her green card and other US benefits. Can she still use the tax treaty to offset her Canadian tax payments or will she end up paying double taxes on her income?

nelsona · Post by **nelsona** » Tue Apr 07, 2015 3:54 pm

Regardless of whre she lives she is entilted to offset her US taxes by what she pays in canada. Nothing special there. Its called foreign tax credit, form 1116; it's not a treaty issue., its IRS regulations.

the issue is whetyher she wants to continue having suffcient residental ties in canada to keep (or evn deserve) being treated as a Cdn resident.

If she "moves" from canada (in my opinion, she already has, since she spends more time in US than canada), the following things happen:

her OAS in no longer subject to clawback.
her CPP and SS are no longer subject to Cdn tax.
her Cdn pensions are flat-taxed at 15% maximum
her non-real estate investments are no longer taxed by canada.
she LOSES provincial healthcare
she loses GST credit

Now that she has Medicare, what is holding her back?

RichardS · Post by **RichardS** » Tue Apr 07, 2015 9:36 pm

Nelsona,

Thanks so much for your help and your rapid response to my concerns. I've started reading the instructions for Form 1116. I may have some more questions when I finally get through it.

My wife spent her life in Canada and has family and friends here. We met on a trip to Borneo, where we were both grieving the loss of our long-time spouses. The solution of where to live was to spend equal time at her home in Canada and at mine in the USA, so we can continue to see our friends and continue our activities.

I'm amazed at how many responses you have given on this blog. You are truly a generous person with your time.

Richard

nelsona · Post by **nelsona** » Tue Apr 07, 2015 10:10 pm

Well, now with a green card the expectation is that she live in US, otherwise she risks forfeiture of that when she "visits" US. That is the "price" of getting GC.

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