Canadian income under $10,000 - how to claim treaty benefits

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puzon23
Posts: 61
Joined: Fri Apr 02, 2010 9:04 pm

Canadian income under $10,000 - how to claim treaty benefits

Post by puzon23 »

Hi All,

I was wondering if someone could shed some light on this as I'm not 100% sure how to deal with this.

I'm a Canadian citizen living and working in US. Since I used to work in Canada I have stock vesting from there from my previous employer. 2017 was my last year when my stock vesting was tied to Canadian income since I was granted those RSUs when I was still employed in Canada.

Long story short, I have a T4 for less than $10,000 CAD for 2017. Income is shown in lines 14 and 38. There was federal withholding as well as CPP taken on this.

My plan is to file a Canadian tax return and putting the entire amount on line 256 to claim treaty benefits based on article XV. This basically will reduce my income to 0 and I can get all my money back.

However, the question is for provincial return. I know I have to do one for Ontario since the company that gave me RSUs was based in there (I did one last year as well but then my income from stock was more than $10,000 CAD so no treaty benefit claim for me then).

So, on that return (ON428) is my income for the calculation going to be 0 as well or does it have to be the original one from line 14 on T1? The reason I ask that question is because I know that in US states do not have to follow treaty claims for their tax returns and therefore can charge tax. Is it the same in Canada for provinces?

Someone, please assist.

Thanks!
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

In Canada, the provinces follow the Feds. You will owe no tax on this income.
Your CPP and EI are claimable as a credit on your 1040, using form 1116.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
puzon23
Posts: 61
Joined: Fri Apr 02, 2010 9:04 pm

Post by puzon23 »

Nelsona - thank you for your answer.

I have one more follow up question. In the US I file 1040 return because of substantial presence test, I'm not a permanent resident in US (yet). I know that US residents are not supposed to claim treaty benefits as this could affect their status and US citizens cannot claim it at all either.

Anyway, in my situation, is it still ok to claim treaty benefit on line 256 of T1 on my Canadian return? If not, I will just calculate how much tax I actually own in Canada and claim as much foreign tax credit as possible on form 1116 on my US return. I prefer to claim treaty as I can get a bigger break but I also don't want to get in trouble with either CRA or the IRS.

Thoughts?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

US citizens can't claim many treaty positions WHEN LIVING ABROAD.

So, using your example, if you were a US citizen living in Canada, and had US wages of less than $10K, you could NOT apply the same treaty position on your 1040 that you are now using. There are other remedies that you would need to use.

Besides, you are not claiming a treaty right from IRS. You are doing so from CRA, which doesn't have such a restriction in the treaty.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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