Filing in Canada and US (Returned to Canada)

[LAXtoYVR]

Hi all,

My husband and I returned to Canada in May 2016 after living in the US for 8+ years. We are not US citizens or permanent residents, and are both Canadian.

I am planning on filing an extension for our US tax returns to take advantage of the full year filing option rather than dual status, so we will be filing around the end of May to qualify for the foreign tax exclusion for my Canadian salaried income since moving back. However, ALL of my husband's income is US-sourced.

Since we have to file Canadian taxes by the end of April, and have to report world-wide income, I am assuming we will have to pay Canadian income tax on my husband's US-sourced income since we won't have the completed US tax return to claim the specific amount of the foreign tax credit. If this is the case, how do I then claim the Canadian income tax we paid when we go to file US taxes at the end of May? Should I fill out a 1116 for my husband? As noted, I would like to file the 2555 for myself, but since his income is not Canadian-sourced, and it seems we will have to pay Canadian income tax on it due to the timing of the returns, I am wondering if 1116 applies in his case.

Thanks for your help!

[nelsona]

When you return to Canada, you only file a part-year Cdn return, based on the day of arrival. Thus you would only report US-sourced income received after that date, not before.

1116 cannot be used for US-sourced income, of course. If he has US income from after may, he would claim any FTC on his Cdn return, based on the tax he paid on that US income on your joint 1040. Given that you will use 2555 on your Cdn wages, the only things that might be on a 1116 would be any other Cdn-sourced income you might have received during 2016: interest, etc. You might want to try both 2555 and 1116 for your Cdn wages to see which is best.